(6) Property, plant and equipment

As of December 31, 2017 and 2016, property, plant and equipment consisted of the following:

	December 31,			December 31,
	2017			2016
Property, Plant, and Equipment:
Land use rights	$	12,479,814		$	11,755,168
Building and improvements		98,866,703			92,927,111
Machinery and equipment		118,670,578			123,932,336
Vehicles		593,265			590,619
Construction in progress		36,077,498			25,084,416
Totals		266,687,858			254,289,650
Less: accumulated depreciation and amortization		(77,299,149	)		(66,599,770	)
Property, Plant and Equipment, net	$	189,388,709		$	187,689,880

As of December 31, 2017 and December 31, 2016, land use rights represented two parcel of state-owned lands located in Xushui County of Hebei Province in China, with lease terms of 50 years expiring from 2061 to 2066.

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$23 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$23 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 $2,296) to the leasing company and buy back all of the Leased Equipment. The sale-leaseback was 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 was included as part of the property, plant and equipment of the Company during the lease period. 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 has been amortized by the Company during the lease term and used to offset the depreciation of the Leased Equipment. See ”Financing with Sale-Leaseback” under Note (7), Loans Payable, for details of the transaction and asset collaterals.

On July 1, 2015, Orient Paper HB, China Orient, and other guarantors of Lease Financing Agreement, entered into the 2015 Agreement, to amend and restate the Lease Financing Agreement entered into in 2013. The 2015 Agreement sets forth a modified and extended payment schedule with respect to the remaining payment obligation, with the final repayment date extended to June 21, 2017. In accordance with ASC 840-30-35, the present balances of the capital lease assets and obligations under capital lease were adjusted by an amount equal to the difference between the present value of the future minimum lease payments under the revised agreement (computed using the interest rate used to recognize the lease initially) and the present balance of the obligation, which was approximately $1,617,574 at the date of the 2015 Agreement. As a result, the capital lease asset cost was recorded at the new cost of $27,599,774 at the date of the 2015 Agreement.

On August 24, 2017, the Company made a final payment on outstanding obligations and bought back all of the Lease Equipment at nominal price according to the agreement. The lease assets were reclassified as own assets and capital lease cost were $nil and $24,328,940 as of December 31, 2017 and December 31, 2016, respectively.

Construction in progress mainly represents payments for the new 15,000 tonnes per year tissue paper manufacturing equipment PM8, the tissue paper workshops and general infrastructure and administrative facilities in the Wei County Industrial Park. The tissue paper development project at the Wei County Industrial Park is expected to be completed in 2018. For the years ended December 31, 2017 and 2016, the amount of interest capitalized is $9,833 and $53,535, respectively.

As of December 31, 2017 and 2016, certain property, plant and equipment of Orient Paper HB with net values of $7,963,285 and $9,813,294, respectively, have been pledged pursuant to a long-term loan from credit union of Orient Paper HB. In addition, land use right of Orient Paper HB with net values of $6,437,419 and $nil as of December 31, 2017 and 2016 were pledged for the bank loan from Bank of Industrial & Commercial Bank of China. See ”Short-term bank loans ” under Note (7), Loans Payable, for details of the transaction and asset collaterals.

As of December 31, 2017 and 2016, land use right with net values of $nil and $6,200,401 was pledged for the saleleaseback financing. In addition, production equipment of Orient Paper Shengde with net value of $nil and $23,654,125 as of December 31, 2017 and 2016 has been pledged for the guarantee of Orient Paper HB’s performance under the capital lease. 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 $14,633,780 and $15,287,509 for the years ended December 31, 2017 and 2016, respectively.