Problem 11-2 Comprehensive problem; Chapters 10 and 11 [LO11-2, 11-4] Please sho
ID: 2484211 • Letter: P
Question
Problem 11-2 Comprehensive problem; Chapters 10 and 11 [LO11-2, 11-4]
Please show step by step in detail-Thank you!
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 22,000 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 $216,000 and $504,000, respectively.
On March 25, 2016, new parking lots, streets, and sidewalks at the acquired plant facility were completed at a total cost of $174,000. 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 $322,000. Additional costs of $11,000 for delivery and $47,000 for installation were incurred.
On September 30, 2016, a truck with a cost of $23,700 and a book value of $8,600 on date of sale was sold for $11,200. Depreciation for the nine months ended September 30, 2016, was $1,935.
On December 20, 2016, a machine with a cost of $15,500 and a book value of $2,900 at date of disposition was scrapped without cash recovery.
Category Plant Asset Accumulated Depreciationand Amortization Land $ 172,000 $ — Buildings 1,350,000 325,900 Machinery and equipment 975,000 314,500 Automobiles and trucks 169,000 97,325 Leasehold improvements 210,000 105,000 Land improvements — — Required 1. Prepare a schedule analyzing the changes in each of the plant asset accounts during 2016. Do not analyze changes in accumulated depreciation and amortization CORD COMPAN Analysis of Changes in Plant Assets For the Year Ending December 31, 2016 Balance Balance 12/31/15 Increase Decrease 12/31/16 Land Land improvements Buildings Machinery and equipment Automobiles and trucks Leasehold improvements 172,000 1,350,000 975,000 169,000 210,000 $ 2,876,000$ 0 $ 0 $ 2. For each asset category, prepare a schedule showing depreciation or amortization expense for the year ended December 31, 2016. (Do not round intermediate calculations.) CORD COMPANY Depreciation and Amortization Expense For the Year Ending December 31, 2016 Land Improvements Buildings Machinery and equipment Automobiles and trucks Leasehold improvements Total depreciation and amortization expense for 2016 S
Explanation / Answer
Part 1)
The schedule analyzing the changes in each of the plant asset accounts during 2016 is given below:
Notes:
1) The total fair value of common stock will be allocated to land and building in proportion of their assessed values.
Total Fair Value = 22,000*60 = $1,320,000
The allocation is calculated with the use of following formula:
______
The value of machinery and equipment is calculated as follows:
Machinery and equipment purchased on July 1, 2016.
___________
Part 2)
The schedule of depreciation and amortization is given below:
Notes:
The detailed depreciation/amortization calculations provided in the below table
Cord Company Analyses of Changes in Plant Assets For the Year Ending December 31, 2016 Balance Balance 12/31/15 Increase Decrease 12/31/16 Land 172,000 396,000 0 568,000 Land Improvements 0 174,000 0 174,000 Buildings 1,350,000 924,000 0 2,274,000 Machinery and Equipment 975,000 380,000 15,500 1,339,500 Automobiles and Trucks 169,000 12,200 23,700 157,500 Leasehold Improvements 210,000 0 0 210,000 $2,876,000 $1,886,200 $39,200 $4,723,000