Question

canadian accounting:

At December 31, 20x8, McCord Company's plant asset and accumulated depreciation accounts had balances as follows:

Category	Cost	Accumulated Depreciation
Land	$175,000	$-
Buildings	1,500,000	328,900
Machinery and equipment	1,125,000	317,500
Automobiles and trucks	172,000	100,325
Leasehold improvements	216,000	144,000
Land improvements	-	-

Depreciation methods and useful lives:
Buildings - 6% diminishing balance
Machinery and equipment-straight line - 10 years
Automobiles and trucks - 30% diminishing balance; all acquired after 20x5. Leasehold improvements - straight line.
Land improvements - straight line.

Depreciation is computed to the nearest month and residual values are immaterial.

Transactions during 20x9 and other information are as follows:

a. On January 6, 20x9, a plant facility consisting of land and building was acquired from King Corp. by the issue of common shares valued at $1,300,000. The plant facility could have been purchased for $1,250,000 cash. The fair value of the land and building (i.e. if they were acquired separately) is $600,000 and $750,000 respectively.

b. On March 25, 20x9, new parking lots, streets, and sidewalks at the acquired plant facility were completed at a total cost of $192,000. These expenditures had an estimated useful life of 12 years.

c. The leasehold improvements were completed on December 31, 20x5, and had an estimated useful life of six years. The related lease, which would terminate on December 31, 20x11, was renewable for an additional four year term. On April 29, 20x9, McCord exercised the renewal option, extending the lease to December 31, 20x15.

d. On July 1, 20x9, machinery and equipment were purchased at a total invoice cost of $325,000. Additional costs of $10,000 for delivery and $50,000 for installation were incurred.

e. On August 30, 20x9, McCord purchased a new automobile for $42,500.

f. On September 30, 20x9, a truck with a cost of $24,000 and a carrying amount of $9,100 on date of sale was sold for $11,500. Depreciation for the nine months ended September 30, 20x9, was $2,650.

g. On December 20, 20x9, a machine with a cost of $17,000 and a carrying amount of $2,975 at date of disposition was scrapped without cash recovery.

Required -

a. Prepare a schedule analyzing the changes in each of the plant asset accounts during 20x9. This schedule should include columns for beginning balance, increase, decrease, and ending balance for each of the plant asset accounts. Do not analyze changes in depreciation amortization.

b. For each asset category, prepare a schedule showing depreciation expense for the year ended December 31, 20x9. Round computations to the nearest whole dollar.

Answer 1

Part A.)

McCORD COMPANY

Analysis of Changes in Plant Assets

For the Year Ending December 31, 20X9

                                                      Balance                                                                          Balance

                                                      12/31/X8             Increase                Decrease              12/31/X9

Land                                          $    175,000         $    312,500 [1]         $    --                 $   487,500

Land improvements                            --                     192,000                     --                      192,000

Buildings                                      1,500,000               937,500 [1]               --                   2,437,500

Machinery and equipment           1,125,000               385,000 [2]            17,000              1,493,000

Automobiles and trucks                  172,000                 12,500                  24,000                 160,500

Leasehold improvements                216,000                     --                          --                      216,000

                                                   $3,188,000          $1,839,500                $41,000            $4,986,500

Explanations of Amounts:

[1]     Plant facility acquired from King 1/6/X9—allocation to Land and Building:

              Fair value—25,000 shares of Cord common

                stock at $50 per share fair value                         $1,250,000

          Allocation in proportion to appraised values at date of exchange:

                                                   % of

                            Amount         Total

          Land          $187,500             25

          Building    562,500           75

                           $750,000           100

          Land         $1,250,000 x 25% =                $   312,500

          Building    $1,250,000 x 75% =                     937,500

  $1,250,000

[2]     Machinery and equipment purchased 7/1/X9:

          Invoice cost                                               $325,000

          Delivery cost                                                 10,000

          Installation cost                                             50,000

Total acquisition cost                              $385,000

Part B)

McCORD COMPANY

Depreciation and Amortization Expense

For the Year Ended December 31, 20X9

Land Improvements:

   Cost $192,000

   Straight-line rate (1 ÷ 12 years)                                    x 8 1/3%

   Annual depreciation 16,000

   Depreciation on land improvements for 20X9:

   (3/25 to 12/31)                                                                x 3/4          $   12,000

Buildings:

   Book value, 1/1/X9 ($1,500,000 – 328,900) $1,171,100

   Building acquired 1/6/X9       937,500

   Total amount subject to depreciation 2,108,600

   150% declining balance rate:

     (1 ÷ 25 years = 4% x 1.5)        x 6%         $ 126,516

Machinery and equipment:

   Balance, 1/1/X9 $1,125,000

   Straight-line rate (1 ÷ 10 years) x 10% 112,500

   Purchased on 7/1/X9 385,000

   Depreciation for one-half year         x 5% 19,250

   Depreciation on machinery and equipment for 20X9   $ 131,750

Automobiles and trucks:

   Book value, 1/1/X9 ($172,000 – 100,325)                      $71,675

      Deduct 1/1/X9 book value of truck sold

        on 9/30 ($9,100 + 2,650) (11,750)

      Amount subject to depreciation 59,925

      150% declining balance rate:

      (1 ÷ 5 years = 20% x 1.5)                                              x 30% 17,978

   Automobile purchased 8/30/X9 12,500

      Depreciation for 20X9 (30% x 4/12)   x 10% 1,250

   Truck sold on 9/30/X9 – depreciation (given)         2,650

      Depreciation on automobiles and trucks   $ 21,878

Leasehold improvements:

   Book value, 1/1/X9 ($216,000 – 108,000)                    $108,000

   Amortization over 5 years ÷ 5 years

   Amortization of leasehold improvements for 20X9   $ 21,600

Total depreciation and amortization expense for 20X9   $313,744