The property, plant, and equipment accounts of Robertson Inc.

1. The property, plant, and equipment accounts of Robertson Inc. had the following balances at December 31, 2014.

Account Name Amount

Land $ 300,000

Land improvements 140,000

Buildings 1,100,000

Equipment 960,000

Transactions that occurred during 2014 include the following:

i. A tract of land was acquired for $150,000 as a potential future building site.

ii. A plant facility consisting of land and building was acquired from Pellum Company in exchange for 20,000 shares of Robertson’s common stock. On the acquisition date, Robertson’s stock had a closing market price of $37 per share on a national stock exchange. The plant facility was carried on Pellum’s books at $110,000 for land and $320,000 for the building at the exchange date. Current appraised value for the land is $230,000 and building is $690,000.

iii. Expenditures totaling $95,000 were made for new parking lots, streets, and sidewalks at the corporation’s various plant locations. These expenditures had an estimated useful life of 15 years.

iv. Items of machinery and equipment were purchased at a total cost of $400,000. Additional costs were incurred as follows.

a. Freight and unloading $13,000
Sales taxes 20,000

b. Installation 26,000

v. A machine costing $80,000 on January 1, 2007, was scrapped on June 30, 2015. Double-declining- balance depreciation has been recorded on the basis of a 10-year life.

vi. A machine was sold for $20,000 on July 1, 2015. Original cost of the machine was $44,000 on January 1, 2012, and it was depreciated on the straight-line basis over an estimated useful life of 7 years and a salvage value of $2,000.


1. Prepare a schedule analyzing the changes in each of the property, plant, and equipment accounts for 2014.

2. Prepare a schedule showing the gain or loss from each property, plant, and equipment’s disposal that would be recognized in the company’s income statement for the year ended December 31, 2014.

2. On December 1, 2014, Phifer Landcaping Corp. began construction of a new plant on. On that date, the company purchased a parcel of land for $139,000 in cash. In addition, it paid

$2,000 in surveying costs and $4,000 for a title insurance policy. An old dwelling on the premises was demolished at a cost of $3,000, with $1,000 being received from the sale of materials.

Architectural plans were also formalized on December 1, 2014, when the architect was paid $30,000.

In addition, the necessary building permits that cost $3,000 were obtained from the city and paid for on December 1. The excavation work began during the first week in December with payments made to the contractor as follows.

Date Payment Amount

March 1, 2015 $240,000

May 1, 2015 330,000

July 1, 2015 60,000

The building was completed on July 1, 2015.

To finance construction of this plant, Phifer borrowed $600,000 from the bank on December 1, 2014. The $600,000 was a 10-year loan bearing interest at 8%. Phifer had no other borrowings.


1. What is the balance of land in 2013 and 2014?

2. What is the balance of building in 2013 and 2014?

3. What is the interest expense amount in 2013 and 2014?

4. Calculate the amount of interest Phifer should capitalize in 2013 and 2014. (Hint use the specific interest method).

3. This is a continuation of problem 1 (Robertson Inc.)


For each property, plant, and equipment account prepare a schedule showing depreciation expense for the year ended December 31, 2014. Use the following depreciation methods and useful lives:

Land improvements-Straight line; 15 years

Buildings-150% declining balance; 20 years

Equipment-Straight line; 10years

Depreciation is computed to the nearest month and no residual values are used.

Assignment 4

The following information pertains to a non-cancelable lease agreement between Kimono Leasing Company (lessor) andClayton Company (lessee).

Date/Amount Transaction/Information

January 1, 2014 Lease Inception date with annual lease payment due at the beginning of each year starting with January 1, 2014.

$81,365 Annual lease payment due at the beginning of each year starting with January 1, 2014.

$50,000 Residual value of equipment at end of lease term; amount is guaranteed by the lessee.

6 years Lease term

6 years Economic life of leased equipment

$400,000 Fair value of asset at January 1, 2014

12% Lessor’s implicit rate

12% Lessee’s incremental borrowing rate

$4,000 Executory costs per year which the lessee assumes responsibility to pay.

In addition to the above information, the asset will revert to the lessor at the end of the lease term. The

lessee uses the straight-line depreciation method for all equipment.


1. Use the spreadsheet Lease Amort Schedule to prepare an amortization schedule that would be suitable for the lessee for the lease term.

2. Using the spreadsheet Journal Entries to prepare the journal entries for the lessee for 2014 and 2015 to record the lease agreement and all expenses related to the lease. Assume the lessee’s annual accounting period ends on December 31 and that reversing entries are used when appropriate.

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