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Property, Plant and Equipment
 6 Months Ended
Jun. 30, 2014
Property, Plant and Equipment [Abstract]  
Property, plant and equipment
(8) Property, plant and equipment
 
As of June 30, 2014 and December 31, 2013, property, plant and equipment consisted of the following:
 
  
June 30,
  
December 31,
 
  
2014
  
2013
 
Property, Plant, and Equipment:
      
Land use rights
 
$
7,710,296
  
$
7,761,511
 
Building and improvements
  
22,258,982
   
22,406,836
 
Machinery and equipment
  
124,006,036
   
121,088,942
 
Vehicles
  
702,666
   
683,051
 
Construction in progress
  
74,803,230
   
65,160,213
 
   
229,481,210
   
217,100,553
 
Less: accumulated depreciation and amortization
  
(42,402,936
)
  
(38,565,294
)
Property, Plant and Equipment, net
 
$
187,078,274
  
$
178,535,259
 
 
As of June 30, 2014 and December 31, 2013, land use rights represented a parcel of state-owned land located in Xushui County of Hebei Province in China, with lease terms of 50 years expiring in 2061.
 
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 RMB 150 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 (approximately US$24 million). Concurrent with the sale of equipment, Orient Paper HB leases back all of the equipment (“Leased Equipment”) sold to the leasing company for a lease term of three years. At the end of the lease term, Orient Paper HB may 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 as of June 30, 2014 and December 31, 2013. As a result of the sale, a deferred gain on sale of Leased Equipment in the amount of $1,379,282 was created at the closing of the transaction and presented as a non-current liability. The deferred gain would be amortized by the Company during the lease term and would be used to offset the depreciation of the Leased Equipment, which are recorded at the new cost of $25,822,154 and $25,993,677 as of June 30, 2014 and December 31, 2013, respectively. See “Financing with Sale-Leaseback” under Note (9), Loans Payable, for details of the transaction and asset collaterals. The depreciation of Leased Equipment has started in July 2013 and was included with the depreciation expense of the Company’s own assets in the consolidated statement of income. During the three months ended June 30, 2014 and 2013, depreciation of Leased Equipment were $411,096 and $nil, respectively. During the six months ended June 30, 2014 and 2013, depreciation of Leased Equipment were $825,620 and $nil, respectively. The accumulated depreciation of the leased asset was $1,648,636 and $829,794 as of June 30, 2014 and December 31, 2013. During the three months ended June 30, 2014 and 2013, the gain realized on sale-leaseback transaction were $114,964 and $nil, respectively. During the six months ended June 30, 2014 and 2013, the gain realized on sale-leaseback transaction were $230,887 and $nil, respectively. The gain realized was recorded in cost of sales as a reduction of depreciation expenses. The unamortized deferred gains on sale-leaseback are $922,092 and $1,160,271 as of June 30, 2014 and December 31, 2013, respectively.
 
Construction in progress mainly represents payments for the new 15,000 tonnes per year tissue paper manufacturing equipment PM8, the tissue paper workshops, four warehouses, office buildings and the new staff dormitory in the Wei County Industrial Park. The tissue paper development project at the Wei County Industrial Park is expected to be completed in the second half of 2015. Upon completion, it will bring about an addition of $115,803,910 to the Company’s machinery and equipment. For the three months ended June 30, 2014 and 2013, the amount of interest capitalized is $247,795 and $38,095, respectively. For the six months ended June 30, 2014 and 2013, the amount of interest capitalized is $509,228 and $38,095, respectively.
 
As of June 30, 2014 and December 31, 2013, the three employee dormitory buildings in the amount of $4,103,335 and $4,130,590, which will be sold to a related party company controlled by our Chairman and CEO Mr. Zhenyong Liu by the second half of year 2014, were reclassified as assets held for sale. Please refer to Note (7) for details.
 
As of June 30, 2014 and December 31, 2013, certain property, plant and equipment of Orient Paper HB with net values of $18,501,809 and $21,901,456 have been pledged for the long-term loan from credit union of Orient Paper HB, respectively. As of June 30, 2014 and December 31, 2013, certain of the Company’s property, plant and equipment in the amount of $33,161 and $34,177 have been pledged for the facility obtained from Bank of Hebei. See “Notes Payable” under Note (11) for details. In addition, land use right with net values of $7,376,183 and $7,502,794 as of June 30, 2014 and December 31, 2013 was pledged for the sale-leaseback financing. See “Financing with Sale-Leaseback” under Note (9), Loans Payable, for details of the transaction and asset collaterals.
 
As of June 30, 2014 and December 31, 2013, essentially all production equipment of Orient Paper Shengde with net value of $34,511,101 and $36,134,038 has been pledged for the guarantee of Orient Paper HB’s performance under the capital lease.
 
Depreciation and amortization of property, plant and equipment was $1,928,900 and $1,988,597 for the three months ended June 30, 2014 and 2013, respectively. Depreciation and amortization of property, plant and equipment was $3,867,694 and $3,921,450 for the six months ended June 30, 2014 and 2013, respectively.