At December 31, 2015, Cord Company\'s plant asset and accumulated depreciation a

Question

At December 31, 2015, Cord Company's plant asset and accumulated depreciation and amortization accounts had balances as follows:

     Depreciation is computed to the nearest month and residual values are immaterial. Transactions during 2016 and other information:

On January 6, 2016, a plant facility consisting of land and building was acquired from King Corp. in exchange for 32,000 shares of Cord's common stock. On this date, Cord's stock had a fair value of $60 a share. Current assessed values of land and building for property tax purposes are $246,000 and $574,000, respectively.

On March 25, 2016, new parking lots, streets, and sidewalks at the acquired plant facility were completed at a total cost of $234,000. These expenditures had an estimated useful life of 12 years.

The leasehold improvements were completed on December 31, 2012, and had an estimated useful life of eight years. The related lease, which would terminate on December 31, 2018, was renewable for an additional four-year term. On April 29, 2016, Cord exercised the renewal option.

On July 1, 2016, machinery and equipment were purchased at a total invoice cost of $332,000. Additional costs of $11,000 for delivery and $57,000 for installation were incurred.

On September 30, 2016, a truck with a cost of $24,700 and a book value of $10,400 on date of sale was sold for $12,200. Depreciation for the nine months ended September 30, 2016, was $2,340.

On December 20, 2016, a machine with a cost of $20,500 and a book value of $3,150 at date of disposition was scrapped without cash recovery.

Prepare a schedule analyzing the changes in each of the plant asset accounts during 2016. Do not analyze changes in accumulated depreciation and amortization.

       

For each asset category, prepare a schedule showing depreciation or amortization expense for the year ended December 31, 2016. (Do not round intermediate calculations.)

      

At December 31, 2015, Cord Company's plant asset and accumulated depreciation and amortization accounts had balances as follows:

Explanation / Answer

Part A)

Notes:

1) The increase in values of land and building will be calculated in the proportion of fair values as assessed for property tax.

Fair value - 32,000 shares of Cord Common Stock at $60 Per Share Fair Value = 32,000*60 = 1,920,000

Increase in Land = 1,920,000*246,000/(246,000 + 574,000) = $576,000

Increase in Building = 1,920,000*574,000/(246,000 + 574,000) = $1,344,000

2) The cost of machinery acquired on 1st July 2016 has been calculated as follows:

Cost of Machinery = 332,000 (Invoice Cost) + 11,000 (Delivery Cost) + 57,000 (Installation Cost) = $400,000

____________

Part B)

Cord Company Analysis of Changes in Plant Assets Balance as on 12/31/2015 Increase Decrease Balance as on 12/31/2016 Land 182,000 576,000 758,000 Land Improvements 234,000 234,000 Buildings 1,850,000 1,344,000 3,194,000 Machinery and Equipment 1,475,000 400,000 20,500 1,854,500 Automobiles and Trucks 179,000 13,200 24,700 167,500 Leasehold Improvements 230,000 230,000 $3,916,000 $2,567,200 $45,200 $6,438,000

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