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The plant asset and accumulated depreciation accounts of Pell Corporation had the following balances at December 31, 2017: La
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An item of Property Plant and Equipment should initially be Recorded at Cost. Costs include all costs necessary to bring the asset to working condition for its intended use.

Hence in Part (a) the initial recording of Machinery and Equipment shall be at the following costs:

                        Total Invoice Cost = $2,60,000

                         Freight               =      $5,500

                        Installation Cost =     $27,000

            Initial Measurement(Total) = $292,500

Part (b) The Building Received as donation shall be recorded at Fair Market Value by Debiting Building and crediting the Contribution Revenue Account. Building (initial recognition) = $17,000

Part (c) Expenditure of $50,000 made to repave the parking Lot caused by severe winter weather is General Maintenance, hence will not be added to any asset.

Part (d) Land Initial Measurement :

The Purchase cost of the Land shall be the fair value of asset given up, in this case it is the Shares.

            Purchase Price of Land [$38*10000] = $380,000

            Legal Fees and Title Insurance        = $ 23,000

             Initial Recognition                         = $ 403,000

The cost incurred for getting the building demolished shall not be added to the cost of land as it done after the acquisition got completed.

Part (e) The storage building's initial cost of acquisition shall be the fair value of asset given up and cash amount paid.

              Cash Paid                =15,250

              Fair Value of Old Car = 3,750

               Initial Recognition    = $19,000

      Automobile Derecognition :

      Dr Accumulated Dep              $13500

      Dr Loss on Sale                        $750

      Cr Vendor of Storage Bulding $ 3,750

      Cr Automobiles                      $ 18,000

Schedule of Changes to Fixed Assets:

Plant Asset Accumulated Depreciation Addition/Deletion
Land 350000 0 403000
Land Improvements 180000 45000 0
Building 1500000 350000 17000
Machinery and Equipment 1158000 405000 292500
Automobiles 150000 112000 -18000
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