Accounting and Reporting for Operating Assets Panther Chemical Company is considering building a new chemical plant and is negotiating with Sundrenched Orchards Corporation to purchase the land it needs for the new facility.

a. Chemical plants are Panther’s major asset, and the land and trees are Sundrenched’s major assets. Why must Panther Chemical report a significant amount of depreciation expense on its plants each period while Sundrenched does not report any depreciation on its land?

. Why might it be argued that Panther Chemical should reduce the carrying value of the land on which its chemical plants are built through annual charges to expense, while Sundrenched has no need to do so?

. If Panther purchases land from Sundrenched, what should it do with the costs of removing the orange and persimmon trees and filling the irrigation ditches, since they have nothing to do with actually building a chemical plant?

. Panther Chemical expects its equipment to last for 20 years.

Sundrenched Orchards expects its fruit trees to bear fruit for 15 years. While Panther depreciates less than the full cost of equipment over 20 years, Sundrenched expenses more than the cost of planting and caring for the trees until they bear fruit over the 15-year period. Why might the two companies use different procedures in determining the depreciable base for their assets?