b. On March 25, 2021, new parking lots, streets, and sidewalks at the acquired plant facility were completed at a total cost of $222,000. These expenditures had an estimated useful life of 12 years. c. The leasehold improvements were completed on December 31, 2017, and had an estimated useful life of eight years. The related lease, which would terminate on December 31, 2023, was renewable for term. On April 30, 2021, Cord exercised the renewal option. d. On July 1, 2021, equipment was purchased at a total invoice cost of $330,000. Additional costs of $12,000 for delivery and $55,000 for installation were incurred. e. On September 30, 2021, Cord purchased a new automobile for $13,000. f. On September 30, 2021, a truck with a cost of $24,500 and a book value of $10,000 on date of sale was sold for $12,000. Depreciation for the nine months ended September 30, 2021, was $2,250. g. On December 20, 2021, equipment with a cost of $19,500 and a book value of $3,100 at date of disposition was scrapped without cash recovery. Required: 1. Prepare a schedule analyzing the changes in each of the plant asset accounts during 2021. Do not analyze changes in accumulated depreciation and amortization. 2. For each asset category, prepare a schedule showing depreciation or amortization expense for the year ended December 31, 2021.
b. On March 25, 2021, new parking lots, streets, and sidewalks at the acquired plant facility were completed at a total cost of $222,000. These expenditures had an estimated useful life of 12 years. c. The leasehold improvements were completed on December 31, 2017, and had an estimated useful life of eight years. The related lease, which would terminate on December 31, 2023, was renewable for term. On April 30, 2021, Cord exercised the renewal option. d. On July 1, 2021, equipment was purchased at a total invoice cost of $330,000. Additional costs of $12,000 for delivery and $55,000 for installation were incurred. e. On September 30, 2021, Cord purchased a new automobile for $13,000. f. On September 30, 2021, a truck with a cost of $24,500 and a book value of $10,000 on date of sale was sold for $12,000. Depreciation for the nine months ended September 30, 2021, was $2,250. g. On December 20, 2021, equipment with a cost of $19,500 and a book value of $3,100 at date of disposition was scrapped without cash recovery. Required: 1. Prepare a schedule analyzing the changes in each of the plant asset accounts during 2021. Do not analyze changes in accumulated depreciation and amortization. 2. For each asset category, prepare a schedule showing depreciation or amortization expense for the year ended December 31, 2021.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
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Transcribed Image Text:At December 31, 2020, Cord Company's plant asset and accumulated depreciation and amortization accounts had balances as follows:
Accumulated Depreciation
and Amortization
$
Category
Land
Land improvements
Buildings
Equipment
Automobiles and trucks
Leasehold improvements
Plant Asset
$ 180,000
1,750,000
1,375,000
177,000
226,000
333,900
322,500
105,325
113,000
Depreciation methods and useful lives:
Buildings-150% declining balance; 25 years.
Equipment Straight line; 10 years.
Automobiles and trucks-200% declining balance; 5 years, all acquired after 2017.
Leasehold improvements-Straight line.
Land improvements-Straight line.
Depreciation is computed to the nearest month and residual values are immaterial. Transactions during 2021 and other information:
a. On January 6, 2021, a plant facility consisting of land and building was acquired from King Corp. in exchange for 30,000 shares of Cord's common stock. On this date, Cord's stock had a fair value of $40 a share. Current
assessed values of land and building for property tax purposes are $160,000 and $640,000, respectively.
b. On March 25, 2021, new parking lots, streets, and sidewalks at the acquired plant facility were completed at a total cost of $222,000. These expenditures had an estimated useful life of 12 years.
c. The leasehold improvements were completed on December 31, 2017, and had an estimated useful life of eight years. The related lease, which would terminate on December 31, 2023, was renewable for an additional four-year
term. On April 30, 2021, Cord exercised the renewal option.
d. On July 1, 2021, equipment was purchased at a total invoice cost of $330,000. Additional costs of $12,000 for delivery and $55,000 for installation were incurred.
e. On September 30, 2021, Cord purchased a new automobile for $13,000.
f. On September 30, 2021, a truck with a cost of $24,500 and a book value of $10,000 on date of sale was sold for $12,000. Depreciation for the nine months ended September 30, 2021, was $2,250.
g. On December 20, 2021, equipment with a cost of $19,500 and a book value of $3,100 at date of disposition was scrapped without cash recovery.
Required:
1. Prepare a schedule analyzing the changes in each of the plant asset accounts during 2021. Do not analyze changes in accumulated depreciation and amortization.
2. For each asset category, prepare a schedule showing depreciation or amortization expense for the year ended December 31, 2021.
Complete this question by entering your answers in the tabs below.
Transcribed Image Text:Complete this question by entering your answers in the tabs below.
Required 1 Required 2
For each asset category, prepare a schedule showing depreciation or amortization expense for the year ended December 31,
2021. (Do not round intermediate calculations. Round your final answers to nearest whole dollar.)
CORD COMPANY
Depreciation and Amortization Expense
For the Year Ending December 31, 2021
Land Improvements
Buildings
Equipment
Automobiles and trucks
Leasehold improvements
Total depreciation and amortization expense for 2021
$
$
< Required 1
13,875
142,566
157,350
22,600
336,391
Required 2 >
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