Comprehensive
Response to the following problem:
The Plant Asset and Accumulated Depreciation accounts of Pell Corporation had the following balances at December 31, 2009:
|
|
Plant Asset
|
Accumulated Depreciation
|
|
Land
|
$ 350,000
|
$ -
|
|
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
|
Depreciation method 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. No salvage values are recognized.
Transactions during 2010:
1. On January 2, 2010, 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.
2. On March 31, 2010, a machine purchased for $58,000 on January 3, 2006, was sold for $36,500.
3. On May 1, 2010, 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.
4. On November 2, 2010, Pell acquired a tract of land with an existing building in exchange for 10,000 shares of Pell's $20 par common stock, which had a market price of $38 a share on this date. Pell paid legal fees and title insurance totaling $23,000. The last property tax bill indicated assessed values of $240,000 for land and $60,000 for building. Shortly after acquisition, the building was razed at a cost of $35,000 in anticipation of new building construction in 2011.
5. On December 31, 2010, Pell purchased a new automobile for $15,250 cash and trade-in of an automobile purchased for $18,000 on January 1, 2009. The new automobile has a cash value of $19,000.
Required:
1. Prepare a schedule analyzing the changes in each of the plant assets during 2010, with detailed supporting computations. Disregard the related accumulated depreciation accounts.
2. For each asset classification, prepare a schedule showing depreciation expense for the year ended December 31, 2010. 3. Prepare a schedule showing the gain or loss from each asset disposal that Pell would recognize in its income statement for the year ended December 31, 2010.