Question

Ch Te Homework-1 Read-Only Vira Normal1No Spac.. Heading 1 Heading 2 Tth Paragraph Styles The plant asset and accumulated depreciation accounts of Pell Corporation had the following balances at December 31,2017 Accumulated Plant AssetDepreciation Land Land improvements Building $ 380,000 195,000 48,000 1,650,000 353,000 Machinery and equipment 1,164,000 408,000 165,000115, 000 Automobiles Transactions during 2018 were as follows a On January 2, 2018, machinery and equipment were purchased at a total invoice cost of b. On March 31, 201S, a small storage building was donated to the company. The person donating c On May 1, 2018, expenditures of $53,000 were made to repave parking lots at Pell's plant d. On November 1, 2013, Pell acquired a tract of land with an existing building in exchange for $275,000, which included a $5,800 charge for freight Installation costs of $30,000 were incurred. the building originally purchased it three years ago for $22,000. The fair value of the building on the day of the donation was $16,000. location. The work was necessitated by damage caused by severe winter weather. 10,000 shares of Pell's common stock that had a market price of $37 per share. Pell paid legal fees and title insurance totaling $26,000. Shortly after acquisition, the bulding was razed at a cost of $38,000 in anticipation of new building construction in 2019 e. On December 31, 2018, Pell purchased a small storake building by Riving $15,550 cash and an old automobile purchased for $19.500 in 2014. Depreciation on the old automobile recorded through December 31, 2018, totaled $13,800. The fair value of the old automobile was $4,050 Required: 1. Prepare journal entries to record each of the above transactions/events 2. Prepare a schedule analyzing the changes in each of the plant assets during 2018. Pell Corporation Analysis of Chan In Plant Assets Balance 12/31/18 Plant Asset Categories Balance Increase Decrease

Answer 1

Requirement 1: Journal Entries

a) Purchase of machinery

Jan 2, 2018. Machinery A/c (275000+30000) Dr. 305000

To Cash 305000

b) Building received as donation

Mar 31,2018. Building A/c Dr. 16000

To Donation 16000

[the building received as donation should be recorded at the fair value as on the date of donation]

c) Repaving the parking lot

May 1, 2018. Parking lot repavement A/c. Dr 53000

To Cash 53000

[the repavement expense has been assumed to be a revenue expenditure because it is likely to be incurred every winter]

d) Land acquired

Nov 1, 2018. Land A/c. (37*10000 + 26000) Dr. 396000

To Cash 396000

[ the cost of building razed will not be recognised this year. It may be recognised in the cost of the new building in 2019 in anticipation of which the old one was razed]

e) Purchase of building and automobile

Dec 31, 2018. Building A/c Dr. 15550

To cash. 15550

Automobile A/c Dr. 4050

To cash. 4050

Requirement 2: analysis of changes in plant assets for the year ended dec 31, 2018

Plant asset category Balance 12/31/17. Increase. Decrease. Balance 12/31/17.

Land 380000. 396000. Nil. 776000

land improvements. 195000. Nil. Nil. 195000

building. 1650000. 31550. Nil. 1681550

machinery and equipment. 1164000. 305000. Nil. 1469000

automobiles. 165000. 4050. Nil. 169050