Solutions – Chapter 7 NON-CURRENT OPERATING ASSETS

1. B
6. A

2. B
7. A

MULTIPLE CHOICE - THEORIES
3. A
4. B
8. C
9. D

5. D
10. A

Problem 1
(Pine Company)
Land
25.8M x 8.4/28
Building
25.8M x 14/28
Equipment 25.8M x 5.6/28

Correct cost
P7,740,000
12,900,000
5,160,000

Adjusting Entries:
1.
Land
Building
Equipment
Other Operating Expenses
Salaries and Commission Expense
2.

Recorded Cost
Difference
P7,000,000
P 740,000
9,000,000
3,900,000
4,000,000
1,160,000
740,000
3,900,000
1,160,000

Depreciation Expense – Building
130,000
Depreciation Expense – Equipment
77,333
Accumulated Depreciation – Building
Accumulated Depreciation – Equipment
5% x 3,900,000 x 8/1 2 = P130,000
10% x 1,160,000 x 8/12 =
77,333

5,000,000
800,000

116,667
77,333

Problem 2
(Gay Company)
Discount on Notes Payable (5% x 850,000)
Equipment

42,500

42,500

Problem 3
Lakeside Company
a.

Machinery
Raw materials used in construction P176,000 – 4,000 P172,000
Labor
50,000
Cost of installation
10,000
Materials spoiled in trial runs
5,000
Incremental overhead due to machine construction
25,000
Decommissioning cost 40,000 x .56447
22,579
Purchase of machine tools
Correct Cost
P284,579

b. Adjusting entries:
Machinery
Loss on Disposal of Old Machine
Purchase Discounts
Profit on Construction
Machinery Tools
Accumulated Depreciation – Machinery (old)
Factory Overhead Control
Provision for Machine Dismantling
Machinery (old)

Machinery Tools

P15,000
P15,000

1,579
3,000
4,000
24,000
15,000
120,000
25,000
22,579
120,000

000 Cost of razing old building 220.520 36.6048 Total cost P50.370.000 25.000 x 3.480 P410.000 26.000 Sale of scrap ( 25.480) Machine Interest Expense Discount on Notes Payable 360.000 300.000 Org’n Exp P18.520 139. Buildings and Equipment 8.000 – 360.048 36.000.000.000 Org’n Exp.000 Corporate organization costs Title clearance fees 25.579 x 10%) – 28.000 Problem 5 Electro Corporation Correct cost: Down payment PV of future payments P100.683 Adjusting Entries: Discount on Notes Payable (500.000 Taxes Expense Adjusting Entries Land Building Organization Expenses Taxes Expense Miscellaneous Revenues Administrative Salaries Land.000 158 Others P50.480 x 12% x 10/12 Accumulated Depreciation Depreciation Expense 13.650 4.683 – 18.048 4.480 Correct Depreciation 410.150.Solutions – Chapter 7 NON-CURRENT OPERATING ASSETS Depreciation Expense – Machinery Accumulated Depreciation – Machinery (284.650 . 30.000 18.000 P18.000 300.000.000 360. (or – APIC) 25.370.300 = 158 Problem 4 Emem Corporation 158 Land Building Organization Fees Land site and old building P8.480 / 15 x ½ P13.000 Org’n Exp.000 25.000) Salaries Stock bonus to corporate promoters Real estate tax Cost of construction Total correct cost P8.900.000 180.333 139.000 Salaries Exp 100.

000/10 x 5) Machinery Repairs Expense 20.200 3.850 .000 Cost Removed part Replacement Revised gross cost Accumulated depreciation.000 20.000 – (1.500 09/01/12 Sold Machine 8 8.000 .000 ( 20.000 100.000) P130.500 3.800 P4.000 + 3.000 ( 3.000) ___ P60.000 20.200 Loss on sale Equipment Repairs and Maintenance 3.000) 2012 depreciation 130000/(10-5+5) Recorded depreciaition Adjustment (80.400 P 600 4.500 x 10% Balances.000 7.000 P200.000 – 3.200 4.200 7.200) __ 6. 1/01/12 6/01/12 Purchase of Machine 14 P15.000 18.000 x 10% x 4 Depreciation for 2012 60.000 Problem 7 Silver Company Equipment Balance.000 ( 40. December 31. 2012 P 50.050 P 30.000 P 13.000 P 7.000 P210. 12/31/11 200.000 40.400) Net proceeds P1.500 Adjusting Entries: Accumulated Depreciation Loss on Sale of Equipment Equipment 8.000/10 x 5 Removed accumulated depreciation Carrying value after overhaul 50.500 Accumulated Depreciation P 28.000) 50.500 ( 8.Solutions – Chapter 7 NON-CURRENT OPERATING ASSETS Problem 6 Flames Company Accumulated Depreciation – Machine Loss on Replacement of Machine Parts Machinery (40.000 Accumulated Depreciation Depreciation Expense 7.000 50.000 – 400 Carrying value P8.

2010 Balances Equipment Accumulated Depreciation P 223.000 64.000 x 10% x ½ 64.000 Accumulated Depreciation Depreciation Expense 24.000 Oct.000 Profit on Construction Building 150.000 (20.000 x 9/12) Prepaid Rent Finance Lease Liability Machinery and Equipment 375. 1 Sale 20. 31 Depreciation (223.200 ___ P267.000 x 10% x ½ December 31.000 – 20.000 4.000 3.540.000) P20.000 4.000 500.000 200 200 Problem 9 Berol Giant Corporation Audit Adjusting Entries Rent Expense (50.000) x 10% 20.000 8.000 .000 24.500 4.000 150.440 – 6.000 + P4.300 1.000 Loss on Sale of Equipment Accumulated Depreciation Equipment 4.050 390 390 Problem 8 Conquer Company January 1 Balances May 1 Acquisition P60.000 Land Improvement Land 500.000 P 44.500 Adjusting Entries Equipment Operating Expenses 4.500 P 64.000 x 10% x 2 Dec.040.700 – 24.Solutions – Chapter 7 NON-CURRENT OPERATING ASSETS Accumulated Depreciation – Equipment Depreciation Expense – Equipment 6.000) ( 4.000 3.000 125.

000 25. 2.000 Gain on Sale of M and E P 680.000 600.610.000 25.700. 11.000 Adjustment P 312.026.500.000 / 10 x ½ = 25.000 312.000 500.800.055. 10.000 18.000 Adjustment P 511.880.600.000 Cost P4.250.000.400.000 37.667 Per client 515.880. 7.922. 9.000 29.000.000 1.800.610.000 Accumulated Depreciation – Machinery and Equipment 312.800.667 Accumulated Depreciation – Building Correct depreciation Old P12. Land Land Improvements Accumulated Depreciation – Land Improvements Buildings Accumulated Depreciation – Buildings Machinery and Equipment Accumulated Depreciation – Machinery and Equipment Unearned Income from Government Grant Depreciation Expense – Land Improvements Depreciation Expense – Buildings Depreciation Expense – Machinery and Equipment Amortized Income from Government Grant 30.000 .667 3.000 Correct depreciation P1.000 b.667 600.000 Carrying value P1.000 Accumulated depreciation 480.920.000 Depreciation Expense – Land Improvements Accumulated Depreciation – Land Improvements 500.200.000 Improvement 1.800.000 24.000/12 x ½ 66.000 25.026.000/10 x 6 2.000 Gain on Sale of Machinery Machinery and Equipment 4.667 33.026.000.000 2. 12.Solutions – Chapter 7 NON-CURRENT OPERATING ASSETS Accumulated Depreciation – Machinery and Equipment 2. 8.000 600.000.667 Unearned Income from Government Grant Income from Government Grant 30.000 Per client 3.000 Depreciation Expense – Building 511.600. 4.000 Depreciation Expense – Machinery and Equipment Correct depreciation – Machinery and Equipment (38.370.000 Proceeds 2. 6. 3.000 Total P3.000/25 x ½ 480.000 Land Building Unearned Income from Government Grant 6. Adjusted balances: 1.000 7.667 Donated 24.600.000.000 / 10 x ½ 240.000 4.000/25 x ½ 680.000 P48.000)/10 = P3.600.000 – 4.000 25.000 – 2.000.000/ 25 P480. 5.000 511.

Solutions – Chapter 7 NON-CURRENT OPERATING ASSETS Problem 10 Malabon Company Schedule of Depreciation Expense A.654. Land Improvements Method – straight-line Useful life – 12 years 2012 Depreciation: P1.059.000 .611.000 24.750.000 2.500 P4.000 P1.000 P16.000 1.800. Accumulated Depreciation – Automobiles and Trucks 10.000 3.200) x 30% Sold New P650.000.000 – (P810. Land 2.620.258. Automobiles and Trucks 9.000 x 30% x 4/12 2012 Depreciation – Automobiles and Trucks P775.000 + 235.200.000 – P8. Land Improvements 3.000/10 x 6/12 2012 Depreciation – Machinery C.580.580.200.000 x 6% 2012 Depreciation – Building P560.500 P789.000) = P4.000 E.328.000) / 5 = P 221. Machinery and Equipment 7.326.360 2. Building 5.892.000 P1.920.000 14. Machinery and Equipment Method – straight-line Useful life – 10 years Old including scrapped in December P7. Leasehold Improvements 11.360.5/25 = 6% Old (P12.000/10 New P290.760 B.200 65.250 5.760 7. Accumulated Depreciation – Leasehold Improvements P 120.000) x 6% New P12. Accumulated Depreciation – Land Improvements 4.640 D.000 – 1.750 3.920.760 768. Automobiles and Trucks Method .000 120.800. Accumulated Depreciation – Buildings 6.060.440 235.105.000 P1.210. Leasehold Improvements Method – straight line Useful life – 8 years Lease term : original 6 years upon completion of the improvement Remaining useful life = 8 – 3 = 5 years Remaining lease term = 6 – 3 + 4 = 7 years 2012 Depreciation: (P2.210. Accumulated Depreciation – Machinery and Equipment 8.000 1.150% declining balance Depreciation rate = 1.870.5/5 = 30% Old (not sold) (P13.000 – P2. Building Method – 150% declining balance Depreciation rate = 1.000 / 12 x 9/12 b. Adjusted Balances: 1.

000 300.500.000 x 6/7 100.500.750 590.750 P105.000 . Depreciation 1/1/12 105.625 590.000 Depreciation Expense – Building B Accumulated Depreciation – Building B 3.000 Impairment loss in 2011 P 175.000 Recoverable amount 3. 12/31/12 3.000 e.000 – 500.000 500.000 2012 Depreciation = P4.000 300.750 b. Retained Earnings Accumulated Depreciation – Building B Carrying value 12/31/11 P5.Recovery of Previous Impairment Carrying value.000 x 3.000 15.100.000 125.300.000 40.675.625 d.000 x 7/10 = P3. Depreciation Expense – Machine B Accumulated Depreciation – Machine B P240. Depreciation Expense – Building A Accumulated Depreciation – Building A Carrying value 1/1/12 P6.000 / 20 x 6/12 15.750 / 5 = 15.625 175.000 P 100.000 P3.500.000 ( 26.000 100.000 Impairment Loss Accumulated Depreciation – Machine B Carrying value 12/31/12 P240. Depreciation Expense – Building Accumulated Depreciation – Building 12.5/6 Recoverable amount Impairment loss 40.250.250) P 78.000 500.000.000 / 12 x 3 Carrying amount 1/1/12 78.000 15.Solutions – Chapter 7 NON-CURRENT OPERATING ASSETS Problem 11 Adjusting Entries a.000 Accumulated Depreciation – Building B Gain . Depreciation Expense – Machine A Accumulated Depreciation Cost Acc.000 = Recoverable amount Increase in value Limit on recovery 175.000 x 15/20 = P4.000 / 6 = P 40.725.000 P 15.000 3.000 x 15/120 = P 590.000.000 P140.000 / 7 = P 500.750 P 15.000 175.725.000 P 150.000 c.

net of accumulated depreciation Based on Previous Revaluation P20.200.000 (b) Revaluation surplus transferred to Retained Earnings = P6.000 8.000 500.5)2. net of accumulated depreciation P15.000 6.850.000 (a) Depreciation expense on the building for the year 2012: P20.000.000.000 P15.000 20.000.000.850.550.000.000 Based on New Revalued Amt.000 21.000.000 P2.000 Balance of Revaluation Surplus at December 31.000.000.000 As of December 31. 2012 statement of financial position = Land Building.000 P5.000.000.000.000 Accumulated Depreciation – Building (PPE) (12M/20 x 4.000 12/31/12 Final P7.000.000.000.000 Land Building Revaluation Surplus Investment Property – Land Investment Property – Building Fair Value Gain on Investment Property Problem 12 Gotham Company Based on Cost Land Building.000 ---------(300.000 (c) Balance of revaluation surplus at December 31.000.000) P2.850.000.000 P4.000 19.000 400.000 Pertaining to building 6.000 2.000 900.000 / 20 = P300.850.000.000) P(300.000 4. 2012 statement of financial position: 12/31/11 Balance Realized in 2012 New Revaluation Pertaining to land P5.500.000 / 20 years = P1.000.000 12.000.550.000 14.000 Total P11. Revaluation Surplus P20.000 Investment Property – Building 12.Solutions – Chapter 7 NON-CURRENT OPERATING ASSETS Investment Property – Land 8.000.000 2. Difference P22. 2011 Based on Balance of Revalued Amt.000.000 6.700.000 .

000 350.000 Retained Earnings (6/60 x 420.667 6.784.000 26.000) Amortization Expense – Franchise Accumulated Amortization – Franchise 42.000 75.500 Retained Earnings (3/24 x 280.000 x 5/7) Prepaid Rent (91.000+1.000 1.000) General and Administrative Expense / Share Premium Discount on Bonds Payable Advertising and Promotions Expenses Other Operating Expenses Share Premium – Ordinary Share Intangible Assets 940.000 84.000 * 36.000 126.000 Amortization Expense – Patents Accumulated Amortization – Patents 740. .000 84.000 – 65.000 740.000 65.000 * If there is no share premium from the same transaction/ If share premium results from the same transaction.000 280.000 61.600.000 140.000 241.860.000 126.667 Problem 14 (Mandy Moore Corporation) Adjusting Entries Research and Development Expense Patents Rent Expense (91.000 250.000) Prepaid Rent 35.000) Rent Expense (1/2 x 280.000 /10 x 10/12 61.000 2.000 2.000 160.000) Goodwill Formula (or Patent) Legal Fees Intangible Assets 420.Solutions – Chapter 7 NON-CURRENT OPERATING ASSETS Problem 13 (Ecstacy Company) Adjusting Entries Franchise Prepaid Rent Retained Earnings Patents Research and Development Expense (400.500 175.000 207.424.000.

000 Accumulated Amortization – Patents To reinstate the gross cost of the patents and related Accumulated Amortization (5.714 2012 Amortization P 910.000 100.000 /5 = 10.000 525.000 6.000 x 7/10 = 525.000 Accumulated amortization = 9.000 + 100.500.95.975.000) Goodwill 145. 2 Unearned Revenue (Correction: advance collection of 2013.000) ÷ 7/14 Total cost is therefore P9.000 – 2.000 Retained Earnings (45.714 Accumulated Amortization – Patents (P2.000 x 7/14 = P4.000 42.500 Impairment Loss – Licensing Agreement No.050.000 440.000 145.000 100.100.Solutions – Chapter 7 NON-CURRENT OPERATING ASSETS Problem 14 (Kookabar Enterprises) Retained Earnings Patents 750.000 = 42.000 – 1.500 5.975. 2 60.000 4.500 / 17 = 5.000) / 14 years = 560.000 .000 / 10 = 6.000 (P9.500 42.700 5.000 910.714 Selling and Administrative Expenses Franchise Agreement 450.950.950.000 Problem 16 (Yuka Sato Corporation) Equipment Patents Cost of Goods Sold Accumulated Amortization – Patents 93.000 34.700 34. 1 Accumulated Impairment – Licensing Agreement 1 70% x 60.714 450.000 Cost of Goods Sold 910.000 Selling and Administrative Expenses Accumulated Amortization – Franchise Agreement 50.000 Licensing Agreement No.000 Patents 4. instead of 2011 revenue) 4.000) / 3 years =P 350.000 6.000 – 525.000 4.000 Retained Earnings Organization Costs 440.000 525.000 Selling and Administrative Expenses Accumulated Amortization – Licensing Agreement No.100.975.

7908 = 530.500 1.000 166.000 Problem 17 Genuine Company (1) Audit Adjusting Entries Patents Accumulated Amortization – Patents 200.980 P166.288 169.000 30.020 P800.000 Amortization of Patents Accumulated Amortization – Patents 100.000 120.100 3.000/ 10 = 1.020 .000 Impairment Loss – Patents Accumulated Amortization – Patents Carrying value before impairment P700.000 21.000 Amortization of Trademarks (150.000 x 3.288 200.000 Equipment Miscellaneous Receivables Leasehold Improvements 15.000 6.712 Impairment loss P169.500 1.000 Value in use = 140.020 169.000 633.000 100.000 Professional Fees and Other Legal Expenses Trademarks 70.288 70.000 32.000 Discount on Notes Payable Franchise Face value of the note Present value when issued 200.1699 Initial discount 166.000 x 3.000 50.500 Retained Earnings Organization Costs 32.000 Professional Fees and Other Legal Expenses Patents 120.Solutions – Chapter 7 NON-CURRENT OPERATING ASSETS Retained Earnings Goodwill 30.100 Retained Earnings Cost of Goods Sold Accumulated Depreciation – Leasehold Improvements 15.000/3) Accumulated Amortization – Trademarks 50.

000 P63.796 dr. 100.000 49.000 Goodwill (285. 12/31/12 = 166. of Principal 1/1/11 P633.Solutions – Chapter 7 NON-CURRENT OPERATING ASSETS Retained Earnings 63.980 Discount on notes payable.398 16.31.262 347.000 ÷ 19/20 ………………………………………… 300.000 Correct cost of the franchise……………………………………………………………… 833.712/5 ……………………….136 Discount on Notes Payable Date Periodic Payment Interest Principal Bal. 49.000 Advertising Expense Goodwill 165.000/ 19 ) Retained Earnings 15.000 Net adjustment to Retained Earnings.000 83.000 Adjusted Balances (a) (b) (c) (d) (e) (f) (g) (h) (i) (j) (k) (l) Gross cost of patents ………………………………………………………………………. 1/1/12……………………………………… 71.980 – 166. 106.398 100.288 Amortization of patents for the year 2013 = 530.398 40.000 Carrying value of patents.. 2011…………………………………….184 Initial cost of goodwill 285.000 + 50.398 P136.738 150.000 165.000 Amortization of patents for 2012………………………………………………………. 12.000 + 633.136…………………… 52.000……………… 120. December 31.398 16.142 Total expenses relating to the Trademark = 70.000 15.602 Franchise Accumulated Amortization 83.738 Carrying value of the Franchise..12 (833.980/10 Adjustment 83.738 113. 800.398 Accumulated Amortization – Franchise Correct cost of franchise = 200.000 Impairment loss on patents – 2012…………………………………………………… 169.884 Interest expense for 2012 relating to the Notes Payable……………………….378 12/31/12 200.602 Amortization of Franchise 83.796)……………… 667.980 Recorded amortization ( 10 year life) Correct amortization 833. .602 Retained Earnings Organization Costs 40.398 Interest Expense 49.980 12/31/11 P200.020 – 113.116 Franchise Retained Earnings 16.P1.602 497.000.) 83.000 (2.980 = 833.

8.000 x 5/12 8 Depreciation expense for 2012 Carrying value as of August 1. B A C A C C B C D B D D C C B C B C C B 21.000 405. 22. 34. 2. 1 – Dec.000 x 90%) / 1.000 = 108 months or 9 years Use unit of output method. 32.000 40.620. 6.Solutions – Chapter 7 NON-CURRENT OPERATING ASSETS Multiple Choice 1.000 / 15. A P300. 23.000 / 1. 13. 10. 24.250 3. 29.750 P180. C Correct depletion for 2012 P4. 30. 31. A Estimated useful life in years = 15 years Estimated mining period = 1.000/10 x 7/12 = (300. 36. 5. 17.000 x (15.500) P191. since mining period is shorter than life in years P270.000 x 6/10) + 36. 38.000 x 90.000 Correct depreciation = (P600. 15.250 P 28. B 2. 42.000 ( 11. 27. 2012 Overhaul costs Depreciation – Aug.000 .250 185. 9. 2013 Proceeds from sale Loss from sale P17.250) ( 13. 41. 43. 25. 16. 28. June 30. 2012 . 18. 33. 39. 4.000 P 6. 14.860.000 P 10. 37.000 tons Recorded depreciation Overstatement in depreciation P 30. 12.000 tons x 6 months) = Recorded depletion Overstatement in depletion 4.620. 31. 40. 35. 3. 11. 20. 2013 216. 19.500 11.620.000 P135. B C D D A B A D B C C C B A B C C B B D A C D C Supporting computations: 1.000 / 8 x 6/12 Carrying value. 7. 26.000 36. 44.January 1 – June 30.

000 + 400.000 = .000 + 7.000 P 400. D Net decrease in cost of buildings and equipment P180. B 8.000. B Net decrease in accumulated depreciation P 90.600 1.462.462.000 13.000 x 107 856.000 Legal work for construction contract Insurance premium during period of construction 22.Solutions – Chapter 7 NON-CURRENT OPERATING ASSETS 5. Plant and Equipment P8.000 FV of shares issued 8.500.000 + 4.000 9. C 7.000 = P 30.400.000 Buildings and Equipment Accumulated Depreciation – Buildings and Equipment Buildings and Equipment 10.000 10.000 60.000 x 500.000 Accumulated Depreciation of Machines 2 and 4 Machine 2 400.000 / 10 x 6/12 Total 6.000 Cost of removal of old buildings 98.000 30.000 Superintendent’s salary Construction costs (600.000.000.500 / 50 x 6/12 Building P 18. D Net gain on exchange (see audit adjustments) P830. C P200.500 P 14.000 P19.000 Buildings and Equipment Loss on Exchange of Buildings and Equipment Buildings and Equipment 240.900 42.000 50. C Land as Property.000 + 400.807.000 x 5/10 = Machine 4 500. C Remaining machines at December 31.000 = Land Cash paid P 800.000 12.000 carrying value + cash paid of P10.000 P225. D Cost assigned to equipment received P20.625 9 through 12 Audit Adjusting Entries: Buildings and Equipment Accumulated Depreciation – Buildings and Equipment Gain on Exchange of Buildings and Equipment Buildings and Equipment 10.000 80.200. 2010 = Machines 2 and 4 only Cost allocated to Machine 2 P1.462.500 P1.000 10.000) ________ Correct cost P1.000.800 x 2/24 Special tax assessment 40.000 11.000 P 1.000 320.000 1.000 Correct cost of building Depreciation for 2012 = P1.000 Examination of title 13.000 70.000 25.000/1.

000 P 6.000 Hence.000 + Building. December 31.000 + 1.200. A Eggs P100.000 17.800.620.000) Carrying value Fair value less cost to sell (520.000 + P16.000 P800. B Depreciation Expense – Investment Property (P8.000.000) P10.000. B Machinery.000 ( 4. A Accumulated Depreciation – Machinery 12/31/2010 12/31/09 08/28/10 12/31/10 Depreciation for 2010 12/31/10 Balance P4.680.820.000) 200.300.000 P3.000 25. B Impairment loss 500.000 – 320.000 P 470.000. P7.000 + 5.680.172.000. C Building as Property.500 28. C 1.394.000 + 2.000. B Accumulated Depreciation – Equipment P8.000 23.000 1.000 (3.000 = P16. D 3.000 20.000 .000 P 100.000 = P13.000 = P28.000 21.000 22.000.000 + 8.800.000.300.000 26.000 = P8.720. D Vehicles 12/31/2010 12/31/2009 06/22/10 12/31/2010 P 4.000 + 2.000 – 50.040. C 7.500) 2.500. the assets held for sale shall be measured at the lower amt.000.000 P 4.000 = P 30.500.041.000 300.860. C Equipment P24.000 5.000.000. 2010 12/31/09 01/03/2010 08/28/2010 Balance 12/31/10 P9.800.100.500.300.920.000.000 + 540.000 24.000 = P 7. P470.000 15. Plant and Equipment P12. B Carrying value Cost Accumulated depreciation (P320.000 / 20) x ½ = P 16.000 – P20.000 27.000 P500. D 860.500.000 = P5.Solutions – Chapter 7 NON-CURRENT OPERATING ASSETS 14.000 = P23.000 18.000 – 800.000 19. C Investment Property Land of P6.000 – 470.

104.920.000 P 9. C Accum. C (100.409.000) / 4 = 34.725 P 53. 31. Depreciation – Building.Solutions – Chapter 7 NON-CURRENT OPERATING ASSETS 29. machinery for 2010 31.000/10) x 1.687.000 1. B Accumulated Depreciation – Land Improvements.500 P1. 2010 (550.000 x 10% x 7.400 P 678.200 P4.400 1.000 13.000) / x 59 months/ 72 months = Carrying value 12/31/11 Overhaul cost Carrying value after overhaul Depreciation expense – 2012 (P2. A Carrying value of land.861. Bal.300 x 40% x 5/12 Carrying value Selling price Loss on sale 1.500 7.000 P2. not sold (4. building 12/31/2011 33.800 542. Dec.760 324.600 P4.500 1. 2012 1.200.000 – 400.000 P2.000 P 18.000 X 98%) + 5.500 – 500.500 P453.225 .000 P2.085.000 54.800.800 / 2 = 2011 depreciation 814.000) / 5 x 8/12 = Machine 2 (4.000 – 1965.000 x 10% x 9/12 = Total P 32.340. 2011 Cost of vehicle sold Accumulated depreciation 12/31/2009 2010 depreciation 1. B 2012 Depreciation (500.600) x 40% = New = 1.000 x 10% x 9/12 = 103.000 – 300.360 P 540.000 – 300.000 x 40% x 6/12 P 1. 31.000 30. C Accumulated Depreciation – Vehicles 12/31/2009 12/31/2010 Depreciation for 2010 On beg.680.394.300.620.000 – 250.500 36.5 Selling price Gain on sale P 45.000 3.000 38.112. 2011 12/31/2009 2010 and 2011 depreciation 903.600 P2. B Depreciation Expense – Machine 2 (2012) Cost of Machine 2 Accumulated depreciation – 12/31/2011 (4.800.800.5 = P 82.000 = P103.600 660.700 32.125 P8.000 – 180.600 P 1.085.661. C Depreciation Expense – Machinery (2010) Machine 1 ( P4.000 – 180.000 35.312. Dec.100.375.000 750.000 P982. December 31.312.900 135.000 ) / 5 = Total depreciation expense.000) / 6 = Machine 3 (5.000 37. C Carrying value = 180.668.760 P3.807.000) x 10% = 180. C Gain or loss on vehicle sold on May 25.965.600 x 2 years Accumulated depreciation.

200 2.000 145. D 125.054 6.000 ( 48.000 P423.000 43.600 5.500 Accounts Receivable – Current Bank Charges Cash Trade Payables 84.000 Accounts Receivable Advances from Customers 14.000 /10 ) Carrying value of franchise. D 2.000 + 100.000 40.000 + (36.000 = P200.000 41.000 + 48.Solutions – Chapter 7 NON-CURRENT OPERATING ASSETS 39.000 + 103.200 3.000 + 27.000) P432.000 42.000 Sales 35.354 86.000 Accounts Receivable – current 20. 12/31/2012 P480.000 .000 120.000 Accounts Receivable – current Sales 35.000 x 9/12 ) = P 327. B 500.900 36.100 600 Accounts Receivable Allowance for Doubtful Accounts 36.000 – 180.000 20.000.000/112%) = (P480.000 + 102.000 Other Non-current Financial Assets Accounts Receivable 120.000 x 9/10 x 1/5 = P 360.000 Summative Exercise Elegant Builders Audit Adjustments: Other Receivables Representation and Advertising Supplies Expense Repairs and Maintenance Petty Cash Fund 5.000 44. A 42.000 Accounts Receivable – current 14.000 = P 244.000 Sales 145.000 20. C Cost = 180.000 + (336. C 300.

350 3.000 Equipment Transportation Expense Repairs and Maintenance 14.600 11.570 12.000 2.205 Other Operating Income Additional Paid in Capital Land 1.400 86.364 162.354 142.364 2.000 Retained Earnings Dividends Payable 1.200\ 5.205 74.333 Utilities Expense Salaries Expense Repairs and Maintenance Trade Payables and Accrued Expenses 44.000 143.650.000 Trading Securities – PS Bank Trading Securities – SM Unrealized Gains on Trading Securities 93.820 Interest Expense Interest Payable 12.600 50.000 142. beginning Other Operating Income Trading Securities – PS Bank 60.000 40.650.600 3.000 1.825 1.000 1. end Cost of goods sold Net Purchases Inventory.333 Depreciation and Amortization 19.400 26.000.400 86.887.200 6.825 Accumulated Depreciation – Leasehold Improvements 19.693.Solutions – Chapter 7 NON-CURRENT OPERATING ASSETS Purchases Trade Payables Doubtful Accounts Expense Allowance for Doubtful Accounts Inventory.600 / 8 = 1.400 Trading Securities – SM Gain on Sale of Trading Securities 8.555.825 8.000 Income Tax Expense Income Tax Payable 1.000 162.000 60.354 .040.025.600 Depreciation and Amortization Accumulated Depreciation – Equipment 14.

13.364 325.000 – 900 = 319.960. 39.000 332. 26.600 143.050 546. 4. 23.161 9.205 1.600 gain 4.000 1.200 = 291.600 691. 8.681. 22.000. 12. 18.205 151. 34 35 36 37 38. 7.920 5.200 11. 6.646 3.000 793.200 1.693.250 – 84.200 60.Solutions – Chapter 7 NON-CURRENT OPERATING ASSETS 1. 40.475 912. 15. 16.284 30.000. 31.650.850 6 years which is 12 – 6. 24. 33. 21. 32. 30.600 1.333 120. 5. 9. D A A D B 375. 11.887.492 162.825 193. 3.400 135. 27 28 29. 14.614.000 482.320 73.471.200 650.226. 2. 25.950.100 76. 20.000 934. shorter than 10 – 6 + 6 see audit adjustments Petty cash fund Cash in bank Trading securities. 19.600 2.750 – 226. at market Unrealized gain or loss on trading securities Accounts receivable Allowance for doubtful accounts Other Receivables – current Merchandise inventory Prepaid expenses Land Equipment Accumulated Depreciation – Equipment Net book value of leasehold improvements Other Non-current Financial Assets Trade Payables and Accrued Expenses Notes Payable and Accrued Interest Dividends Payable Income Tax Payable Additional Paid in Capital Retained Earnings Net Sales Net Purchases Salaries and Commissions Repairs and Maintenance Supplies Expense Bank Charges Interest Expense Other Operating Income Transportation Expense Depreciation and Amortization Doubtful Accounts Expense Representation & Advertising Ordinary Share Capital Profit Answer 4.054 14.354 1. at cost Trading securities. 10.200 352.161 .350 59. 17.000 5.000 142.

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