The plant asset and accumulated depreciation accounts of Pell Corporation had the following balances at December 31, 2015:
Plant Asset Accumulated Depreciation
Land $ 300,000 $ 0
Land improvements 165,000 35,000
Building 1,400,000 300,000
Machinery and equipment 1,058,000 355,000
Automobiles 140,000 107,000
Transactions during 2016 were as follows: a. On January 2, 2016, machinery and equipment were purchased at a total invoice cost of $210,000, which included a $4,500 charge for freight. Installation costs of $17,000 were incurred.
b. On March 31, 2016, a machine purchased for $48,000 in 2012 was sold for $31,500. Depreciation recorded through the date of sale totaled $20,400.
c. On May 1, 2016, expenditures of $40,000 were made to repave parking lots at Pell’s plant location. The work was necessitated by damage caused by severe winter weather.
d. On November 1, 2016, Pell acquired a tract of land with an existing building in exchange for 10,000 shares of Pell’s common stock that had a market price of $28 per share. Pell paid legal fees and title insurance totaling $18,000. Shortly after acquisition, the building was razed at a cost of $25,000 in anticipation of new building construction in 2017.
e. On December 31, 2016, Pell purchased a new automobile for $12,750 cash and trade-in of an old automobile purchased for $13,000 in 2012. Depreciation on the old automobile recorded through December 31, 2016, totaled $9,750. The fair value of the old automobile was $3,250.
Required:For each asset classification, prepare a schedule showing depreciation for the year ended December 31, 2016, using the following depreciation methods 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 and no residual values are used.
