Professional Documents
Culture Documents
CHAPTER 5
PROPERTY, PLANT AND EQUIPMENT
PROBLEMS
5-1
(Uy Company)
Land
Office building
Warehouse
Managers
residence
5.2
5-3
(6,750,000
(6,750,000
120,000
(6,750,000
(6,750,000
x 2,187,500/5,625,000)
x 2,000,000/5,625,000) +
2,625,000
2,520,000
x 937,500/5,625,000)
x 500,000/5,625,000)
1,125,000
600,000
(Chang Corporation)
a.
720,000 x .90
b.
Down payment
Present value of 24 monthly installments
25,000 x 21.24
Total
P648,000
P150,000
531,000
P681,000
(Urban Corporation)
Land
Land purchase
Land
Improvement
s
Building
P2,000,00
0
300,000
150,000
P
80,000
270,000
5,000,000
120,000
P350,000
800,000
100,000
(70,000)
P2,500,00
0
P350,000
(640,000)
P5,610,000
30
*Landscaping costs may be charged to the land account if there is an indication that
such an expenditure is permanent in nature.
5-4
5-5
(Doy Company)
Purchase price of land
Payments to tenants to vacate premises
Demolition of old building
Legal fees for purchase contract and recording ownership
Title guarantee insurance
Proceeds from sale of salvaged materials
Total
(Yu Corporation)
P4,000,000
200,000
100,000
50,000
20,000
(10,000)
P4,360,000
Land
I
m
pr
ov
e
m
en
ts
P 10,000
110,000
P120,000
Buildings
P
900,000
2,000,000
20,000
50,000
50,000
P3,020,00
0
Machinery
and
Equipment
P 980,000
2,000,000
60,000
140,000
400,000
P3,580,000
The interest of P150,000 is an imputed interest and is not recognized anywhere in the
financial statements.
The royalty payments of machines purchased is charged to operating expense for the
period.
5-6
50,000
55,000
a.
Cash price
b.
Downpayment
P215,000
P
31
110,947
P
P
P 2,215,000
Cash price
800,000 x .90 x .98
Present value of the disposal costs
50,000 x 0.5019
25,095
5.7
150,000
P22,150,000
P705,600
Cost of equipment
P730,695
50,000
350,000
540,000
60,000
1,000,000
400,000
320,000
50,000
70,000
600,000
5-8
b.
32
150,000
187,500
P697,500
P348,500
18,900
5-9
P
3,900
P
(Metro Company)
a.
4,000,000 x 10%
Less interest income earned on temporary investment of loan
( 85,000)
Capitalized interest
b.
40,000
c.
P400,000
P315,000
1,000,000 x 10%
1,000,000 x 10% x 9/12
1,000,000 x 10% x 6/12
1,000,000 x 10% x 3/12
Total interest
Less interest income earned on temporary investment of loan
P100,000
75,000
50,000
25,000
P250,000
Capitalized interest
P210,000
400,000
1,000,000 x 9/12
750,000
1,200,000 x 5/12
500,000
1,000,000 x 3/12
250,000
400,000 x 0/12
Average accumulated expenditures
P1,900,000
2,800,000 x 10%
1,600,000 x 10%
2,000,000 x 12%
Total interest on loans
P680,000
Less capitalized interest: (1,900,000 x 10.625%*)
Interest expense for 2008
----------
11.14%
P160,000
20,000
P140,000
33,420
P173,420
P280,000
160,000
240,000
201,875
P478,125
(Lim Company)
360,000 x 12/12
600,000 x 7/12
350,000
P 360,000
33
a.
b.
144,000
1,500,000 x 6/12
1,500,000 x 1/12
Average accumulated expenditures
750,000
125,000
P1,585,000
P 360,000
49,000
P 311,000
P
Interest on general borrowings
385,000* x 12.14%**
Capitalized interest
46,739
141,739
5-12
a.
Tooling Machine
Automobile
Gain on Exchange of Automobile
b.
Machine (new)
Accumulated Depreciation-Machine (old)
Loss on Exchange of Machine
Machine (old)
Cash
(850,000340,000)-(1,200,000
880,000)=190,000 loss
(Tan Company)
a.
Depreciation charges for 2008 and 2009
2008
a. SL
(800,000 80,000) / 8 = 90,000
90,000 x 9/12= 67,500
b. Hrs
720,000/100,000 hrs = 7.20/hr.
worked
7.20 x 4,500 hrs = 32,400
c. Units
720,000/900,000 units = 0.80/unit
of
080 x 40,000 units = 32,000
output
d. SYD
720,000 x 8/36 x 9/12 = 120,000
b.
e. DDB
2/8 = 25%
25% x 800,000 x 9/12=150,000
f. 150%
DB
1.5/8 = 18.75%
18.75% x 800,000 x 9/12=
112,500
34
172,800
1,200,000
340,000
190,000
135,000
37,800
850,000
880,000
2009
90,000
7.20 x 5,500 hrs = 39,600
0.80 x 60,000 units =
48,000
720,000 x 7.25/36
=145,000
800,000150,000=650,000
25% x 650,000 = 162,500
800,000112,500=687,500
18.75% x 687,500) =
128,906
(Real
a.
b.
c.
P30,000
P18,000
Cost
Accum. Depr.
800,000
800,000
800,000
800,000
800,000
800,000
157,500
72,000
80,000
265,000
312,500
241,406
Carrying
amount
642,500
728,000
720,000
535,000
487,500
558,594
Company)
2/5 = 40%; 26,400 40% = 66,000
12,000 x 5 years = 60,000; 66,000 60,000 = 6,000
Carrying amounts, end of year 3
Straight-line (66,000 36,000)
Sum-of-the-years digits(66,000 48,000
P13,256
The method with the lowest carrying amount at time of sale will yield the
highest amount of gain on disposal.Therefore, the double-declining balance
method will provide the highest gain on disposal at the end of year 3.
5-14
5-15
127,500
79,688
b.
P80,000
(Citi Company)
a.
Depreciation Expense for 2008
Double-declining balance method
800,000 x 25% x
Sum-of-the-years digits method
720,000 x 8/36
x 1/2
Depreciation Expense for 2009
Double declining
700,000 x 25%
Sum-of-the-years digits method
35
64,000
49,804
P100,000
80,000
P175,000
b.
720,000 x 8/36
x 1/2
P80,000
720,000 x 7/36 x
70,000
P150,000
Carrying (book) value at December 31, 2009
Double-declining balance method
Date
Depreciation Expense for the year
12/31/08
800,000 x 25% X = P100,000
12/31/09
700,000 x 25%
= 175,000
CV, end
P700,000
525,000
P800,000
P 570,000
5-16
(Total Company)
1.
The company changes to the sum-of-the-years digits method
Cost
Less accumulated depreciation (1,100,000 10) x 4
440,000
Carrying amount of the asset, beginning of 5th year
760,000
Revised depreciation for the 5th year
760,000-100,000 = 660,000; 660,000 x 6/21
188,571
2.
132,000
5-17
(Chartered Company)
Cost
Less accumulated depreciation
18,000
Carrying amount, January 1, 2009
30,000 x
P1,200,000
P
P
P 32,000
(5+4) / 15
P 14,000
5-18
(Standard Company)
Cost
P500,000
Less accumulated depreciation:
2005 20% x 500,000
100,000
2006 20% x 400,000
80,000
2007 20% x 320,000
64,000
2008 20% x 256,000
51,200
295,200
Carrying amount, January 1, 2009
P204,800
Depreciation expense for 2009
204,800 10,000 = 194,800; 194,800 5 years
P 38,960
5.19
(Koh Trading)
Carrying amount of the asset, January 1, 2009
Estimated remaining life in years
36
P153,600
8
P 19,200
5-20
(Carmi Company)
Cost
P378,000
Less: Accumulated Depreciation, August 1, 2009(378,00035,000)/5 x 2
137,200
Carrying value, August 1, 2009
P240,800
Overhaul costs (capitalized)
80,000
Carrying value after overhaul
P320,800
Depreciation (August December, 2009, see below
22,567
Carrying value, December 31, 2009
P298,233
Depreciation for 2009
(378,000 35,000)/5 x 7/12
(320,800 50,000) / (5 2) + 2 = 270,800 / 5 x 5/12
Total
5-21
5-22
(Chu, Inc.)
Accumulated depreciation at January 1, 2008 (528,000 x 4/8)
Revised depreciation expense for 2008
528,000-264,000 = 264,000; 264,000 / 2 yrs.
Accumulated depreciation at December 31, 2009
(Allied Company)
Purchase price
Residual value
Development costs incurred and capitalized during 2007
Depletable cost
Estimated supply of mineral resources
Depletion expense per ton
Number of tons removed during 2008
Depletion expense for 2008
Depletable cost, January 1, 2008 (see above)
Less depletion expense for 2008
Add development costs incurred and capitalized during 2009
Depletable cost for 2008
Revised estimated supply of mineral resource, 2009
Revised depletion rate per ton
Number of tons removed during 2009
Depletion expense for 2009
5.23
P40,017
22,567
P62,584
Purchase price
Development costs
Salvage value
Restoration costs at present value (2,500,000 x 0.4632)
Depletable cost
Estimated recovery from the property
Depletion rate per metric ton
Resources extracted during 2008
Depletion expense for 2008
Depletable cost, 2008 (see above)
Depletion expense for 2008
Development costs
New depletable cost for 2008
Remaining number of metric tons (9,250,000-1,000,000)
Revised depletion per metric ton
(rounded)
37
P264,000
132,000
P396,000
P4,450,000
( 650,000)
750,000
P4,550,000
3,500,000
P
1.30
x 550,000
P 715,000
P4,550,000
( 715,000)
961,000
P4,796,000
4,360,000
1.10
700,000
P 770,000
P
P45,000,000
1,500,000
( 6,000,000)
1,158,000
P41,658,000
10,000,000
P
4.1658
x 1,000,000
P 4,165,800
P41,658,000
( 4,165,800)
750,000
P38,242,200
8,250,000
P
4.64
5.24
x 1,500,000
P 6,960,000
P3.00
P0.20
b.
c.
12,000
x 11.20
P134,400
108,000
x 11.20
P1,209,600
P4,200,000
120,000
x 3.00
360,000
P3,840,000
800,000
P
4.80
3.
4.
1,700,000
450,000
150,000
Cash
Accumulated Depreciation-Equipment
Loss on Disposal of Assets
Equipment
120,000
250,000
30,000
Equipment
Cash
298,000
800,000
1,500,000
400,000
298,000
Land
Income from Donated Asset
Cash
8,000,000
38
7,800,000
200,000
7.
Land
Cash
240,000
Equipment
Accumulated Depreciation-Equipment
Gain on Disposal of Assets
Equipment
Cash
150,000
15,000
240,000
Building
Cash
22,000
40,000
103,000
28,000,000
28,000,000
b.
Beginning balance
(3)
(4)
(5)
(6)
(7)
Total
Balance
1,850,000
150,000
2,000,000
5-26
(Pat Corporation)
a.
Depreciation and amortization expense for year ended December 31, 2009
Buildings
1.5/25 = 6%; (12,000,000-2,631,000) x 6%
P
562,140
Machinery and Equipment
Based on beginning balance (9,000,000 x 10%)
900,000
Less depreciation of machine destroyed
230,000 x 10% x 9/12
17,250
P 882,750
New machine
2,800,000 + 50,000 + 250,000=310,000
3,100,000 x 10% x 6/12
155,000
Total
P1,037,750
Automotive Equipment
Based on beginning balance
180,000
Less depreciation of car traded 180,000 x 2/10 36,000
P
144,000
New car
240,000 x 4/10
96,000
Total
P 240,000
Leasehold Improvement
1,680,000 x 8/80
P 168,000
b.
63,000
39
P 40,000
54,000
P(14,000)
P155,000
)
92,000
49,000
5-27
a.
1/1/07
b.
12/31/0
7
Equipment
Revaluation Surplus
Accumulated Depreciation
3,600,000-2,400,000 = 1,200,000 (50%
Inc.)
50% x 4,000,000 = 2,000,000
50% x 1,600,000 = 800,000
Depreciation Expense
2,000,00
0
600,000
Accumulated Depreciation-Equipment
3,600,000 6 yrs = 600,000
12/31/0
7
Revaluation Surplus
12/31/0
8
Depreciation Expense
600,000
200,000
Retained Earnings
1,200,000 6 yrs = 200,000
200,000
600,000
Accumulated Depreciation-Equipment
12/31/0
8
c.
1/1/09
12/31/0
9
600,000
Revaluation Surplus
200,000
Retained Earnings
200,000
Accumulated Depreciation-Equipment
Revaluation Surplus
Equipment
600,000
400,000
Depreciation Expense
500,000
1,000,000
Accumulated Depreciation-Equipment
2,000,000 4 yrs = 500,000
500,000
Revaluation Surplus
Retained Earnings
1,200,000-200,000-200,000400,000=400,000
400,000 4 yrs = 100,000
Cost
Accum
Origin
al
4.000
M
1.600
M
1/1/07
1/1/07
+2.00
M
+0.80
M
6.000
M
2.400
M
1,200,000
800,000
07-08
+1.20
M
40
100,000
100,000
12/31/0
8
6.00M
1/1/09
1/1/09
-1.00M
5.00M
12//31/0
9
5.00M
3.60M
-0.60M
3.00M
3.50M
CV
5.28
2.400
M
+1.20
M
3.600
M
-1.20M
2.40M
-0.40M
2.00M
1.50M
(Lu Company)
2009
Jan. 1
Dec. 31
131,250
Depreciation Expense
Accumulated Depreciation-Machinery
(200,000 20,000) 2 yrs. = 90,000
90,000
MC3
MC4
MC5
MC6
MC7
MC8
MC9
MC1
0
Problems
MC26
d
MC27
d
MC28
c
MC29
c
MC30
c
MC1
1
MC1
2
MC1
3
MC1
4
MC1
5
MC1
6
MC1
7
MC1
8
MC1
9
MC2
0
b
d
b
d
d
MC2
1
MC2
2
MC2
3
MC2
4
MC2
5
c
b
c
c
c
d
c
a
b
d
41
131,250
90,000
MC31
MC32
MC33
MC34
MC35
MC36
MC37
MC38
MC39
d
c
a
MC40
MC41
MC42
MC43
MC44
MC45
MC46
MC47
a
d
MC48
MC49
MC50
MC51
b
b
c
MC52
MC53
MC54
42
MC55
MC56
MC57
MC58
MC59
MC60
MC61
MC62
MC63
d
c
MC64
MC65
43