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Property, Plant and Equipment
 6 Months Ended
Jun. 30, 2013
Property, Plant and Equipment [Abstract]  
Property, plant and equipment
(7) Property, plant and equipment
 
As of June 30, 2013 and December 31, 2012, property, plant and equipment consisted of the following:
 
   
June 30,
 2013
    
December 31,
 2012
  
Property, Plant, and Equipment:
                
Land use rights
  
$
10,112,115
    
$
9,895,081
  
Building and improvements
    
28,593,699
      
31,625,816
  
Machinery and equipment
    
119,927,716
      
111,857,002
  
Vehicles
    
465,220
      
439,007
  
Construction in progress
    
24,050,200
      
1,315,664
  
     
183,148,950
      
155,132,570
  
Less accumulated depreciation and amortization
    
(35,850,036
)
    
(32,741,114
)
Property, Plant and Equipment, net
  
$
147,298,914
    
$
122,391,456
  
 
Land use rights represent two parcels of state-owned land located in Xushui County of Hebei Province in China, with lease terms of 50 years expiring in 2053 and 2061, respectively.
 
The company entered into a sale-leaseback arrangement with a leasing company in China on June 16, 2013 for a total financing proceeds in the amount of RMB150 million (approximately US$24 million). Under the sale-leaseback arrangement, Orient Paper HB sold certain of its paper manufacturing equipment to the leasing company for an amount of RMB 150 million. Concurrent with the sale of equipment, Orient Paper HB leases back all of the equipment sold to the leasing company for a lease term of three years. At the end of the lease term, Orient Paper HB will pay a nominal purchase price of RMB 15,000 (approximately $2,400) to the leasing company and buy back all of the leased equipment. The sale-leaseback is treated by the Company as a mere financing and capital lease transaction, rather than a sale of assets (under which gain or loss is immediately recognized) under ASC 840-40-25-4. All of the Leased Equipment are included as part of the property, plant and equipment of the Company’s as of June 30, 2013. As a result of the sale, a deferred gain on sale of leased equipment in the amount of $758,257 was created and presented a non-current liability. The deferred gain will be amortized by the Company during the lease term and will be used to offset the depreciation of the leased equipment, which are recorded at the new cost of $25,736,822 as of June 30, 2013. See “Financing with Sale-Leaseback” under Note (8), Loans Payable, for details of the transaction and asset collaterals. The amortization of capital lease equipment would start to be charged from the next coming month of the arrangement date, i.e. July 2013. It would be included with the depreciation expense of the company’s own assets in the statement of income. During the quarter and six months ended June 30 2013, amortization of capital lease equipment was nil.
 
Construction in progress mainly represents payments for the new 15,000 tonnes per year tissue paper manufacturing equipment PM8, the tissue paper workshop and the new staff dormitory in the Wei County industrial park.
 
As of June 30, 2013 and December 31, 2012, certain property, plant and equipment of Orient Paper HB with net values of $8,803,929 and $9,316,645 have been pledged for the long-term loan from credit union of Orient Paper HB, respectively. As of June 30, 2013, essentially all production equipment of Orient Paper Shengde with net value of $37,157,082 has been pledged for the guarantee of Orient Paper HB’s performance under the capital lease. Land use right with net values of nil and $7,419,614 were pledged for an independent third party which cross-guarantees the Company’s credit facility from the Bank of Hebei as of June 30, 2013 and December 31, 2012, respectively. The amount of that long-term loan of the third party was $1,505,881 as of December 31, 2012 and has been paid off on June 3, 2013. In addition, land use right with net values of $7,505,504 was pledged for the sale-leaseback financing. See “Financing with Sale-Leaseback” under Note (8), Loans Payable, for details of the transaction and asset collaterals.
 
Depreciation and amortization of property, plant and equipment was $1,988,597 and $2,091,447 during the quarter ended June 30, 2013 and 2012, respectively. Depreciation and amortization of property, plant and equipment was $3,921,450 and $4,050,749 during the six months ended June 30, 2013 and 2012, respectively.