Question

The plant asset and accumulated depreciation accounts of Pell Corporation had the following balances at December 31, 2012:

	Plant Asset			Accumulated Depreciation
Land	$	350,000		$	0
Land improvements		180,000			45,000
Building		1,500,000			350,000
Machinery and equipment		1,158,000			405,000
Automobiles		150,000			112,000

	Transactions during 2013 were as follows:
a.	On January 2, 2013, machinery and equipment were purchased at a total invoice cost of $260,000, which included a $5,500 charge for freight. Installation costs of $27,000 were incurred.
b.	On March 31, 2013, a machine purchased for $58,000 in 2009 was sold for $36,500. Depreciation recorded through the date of sale totaled $24,650.
c.	On May 1, 2013, expenditures of $50,000 were made to repave parking lots at Pell's plant location. The work was necessitated by damage caused by severe winter weather.
d.	On November 1, 2013, Pell acquired a tract of land with an existing building in exchange for 10,000 shares of Pell's common stock that had a market price of $38 per share. Pell paid legal fees and title insurance totaling $23,000. Shortly after acquisition, the building was razed at a cost of $35,000 in anticipation of new building construction in 2014.
e.	On December 31, 2013, Pell purchased a new automobile for $15,250 cash and trade-in of an old automobile purchased for $18,000 in 2009. Depreciation on the old automobile recorded through December 31, 2013, totaled $13,500. The fair value of the old automobile was $3,750.

Required:

For each asset classification, prepare a schedule showing depreciation expense for the year ended December 31, 2013, using the following depreciation methods and useful lives:

  

Land improvements�Straight line; 15 years.

Building�150% declining balance; 20 years.

Machinery and equipment�Straight line; 10 years.

Automobiles�150% declining balance; 3 years.

   

Depreciation is computed to the nearest month and no residual values are used. (Do not round intermediate calculations.)

Answer 1

PELL CORPORATION
Depreciation Expense
For the Year Ended December 31, 2013
Land Improvements
Cost				$      180,000.00
Straight Line Method				15 Years	$    12,000.00
Building:
Book value 12/31/2012	(1,500,000-350,000)			$ 1,150,000.00
150% declining balance rate				7.50%	$    86,250.00
Machinery and Equipment:
Balance, 12/31/2012			$ 1,158,000.00
Deduct machine sold			$        58,000.00	$ 1,100,000.00
Straight Line Method				10%	$ 110,000.00
Purchased 1/2/2013				$      287,000.00
Depreciation				10%	28700
Machine sold 3/31/2013				$        58,000.00
Depreciation for three months				2.50%	$      1,450.00
Total depreciation on machinery and equipment					$ 140,150.00
Automobiles:
Book value on 12/31/2015				$        38,000.00
150% declining balance rate				50.00%	$    19,000.00
Total depreciation expense for 2013					$ 257,400.00