Fin Ac Robles Empleo CH 5 Vol 1 Answers2012

CHAPTER 5
PROPERTY, PLANT AND EQUIPMENT
PROBLEMS
5-1 a. Cash price is the cost. P215,000
b. Downpayment P 50,000
Notes payable (50,000 x 3.1699) 158,495
Preference shares (500 x 110) 55,000
Cost of machine P263,495
c. Purchase price P22,000,000

Appraisal cost 150,000
Total cost to be allocated P22,150,000
Allocation:
Land 22,150,000 x 10,000/25,000 P 8,860,000
Building 22,150,000 x 12,500/25,000 P 11,075,000
Equipment 22,150,000 x 2,500/25,000 P 2,215,000
d. Cash price
800,000 x .90 x .98 P705,600
Present value of the disposal costs
50,000 x 0.5019 25,095
Cost of equipment P730,695
e. Purchase price 154,560/1.12 P138,000

Directly attributable costs 5,000 + 2,000 + 1,500 + 1,800 10,300
Total cost P148,300
5-2 (Uy Company)

Land (4,500,000 x 2,187,500/5,625,000) 1,750,000
Office building (4,500,000 x 2,000,000/5,625,000) + 120,000 1,720,000
Warehouse (4,500,000 x 937,500/5,625,000) 750,000
Managers residence (4,500,000 x 500,000/5,625,000) 400,000
5-3 (Chang Corporation)

a. 720,000 x .90 P648,000
b. Down payment P150,000
Present value of 24 monthly installments
25,000 x 21.2434 531,085
Total P681,085
5-4 (Planters Company and Producers Company)

(a)
Books of Planters Company
Cash 50,000
Equipment 350,000
Accumulated Depreciation-Building 540,000
Loss on Exchange of Building 60,000
Building 1,000,000
1,000,000-540,000 = 460,000 book value
460,000 400,000 = 60,000 loss
Chapter 5- Property, Plant and Equipment
Books of Producers Company

Building 400,000
Accumulated Depreciation-Equipment 320,000
Cash 50,000
Gain on Exchange of Equipment 70,000
Equipment 600,000
600,000-320,000 = 280,000
280,000 350,000 = 70,000 gain
(b)
Books of Planters Company

Equipment 460,000
Building 1,000,000
Books of Producers Company
Building 280,000
Equipment 600,000
5-5 (Abatis Forwarders)
Land 10,340,000
Accumulated Depreciation Trucks 4,400,000
Trucks 12,800,000
Cash ` 340,000
Gain on Exchange of Trucks 1,600,000
5-6 (Business Processing, Inc.)
Equipment (new) 55,000

Accumulated Depreciation 16,000
Loss on Exchange of Equipment 8,000
Equipment ((old) 48,000
Cash (64,000 33,000) 31,000
5-7
King Company
Tooling Machine 172,800
Automobile (net) 135,000
Gain on Exchange of Automobile 37,800
Princess Company
Machinery (new) 1,200,000
Accumulated Depreciation Machinery (old) 340,000
Loss on Exchange of Machinery 190,000
Machinery (old) 850,000
Cash 880,000
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5-8 (Urban Corporation)

Land
Land Improvements Building
Land purchase P2,000,000
Demolition of old building 300,000
Legal fees for land acquisition 150,000
Building permit fees P 80,000
Interest on loan for construction 270,000
Building construction costs 5,000,000
Assessment by the city government for sewer
connection 120,000
Landscaping costs* P350,000
Equipment purchased of use in excavation
(cost proceeds from sale) 800,000 640,000 160,000
Fixed overhead allocated to building

construction 100,000
Salvage from the demolished building (70,000)
Total costs P2,500,000 P350,000 P5,610,000
Compensation for injury to construction worker is chargeable to loss; this expenditure could have
been avoided had the company obtained insurance on its workers. If an insurance was acquired,
the amount of premiums paid may be charged to the building being constructed.
Profit on construction is not recognized anywhere in the accounts. The self-constructed asset
should be charged for the actual costs incurred in its completion.
The cost of modifications to the new building per instruction by the building inspectors is charged
to loss since this expenditure is not a necessary expense for the asset. This was incurred as a
result of the companys negligence and could have been avoided had proper planning been done.
*Landscaping costs may be charged to the land account if there is an indication that such an
expenditure is permanent in nature.
5-9 (Doy Company)

Purchase price of land P4,000,000
Payments to tenants to vacate premises 200,000
Demolition of old building 100,000
Legal fees for purchase contract and recording ownership 50,000
Title guarantee insurance 20,000
Proceeds from sale of salvaged materials (10,000)
Total P4,360,000
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5-10 (Yu Corporation)

Land Machinery and
Improvements Buildings Equipment
Balances, December 31, 2011 P 10,000 P 900,000 P 980,000
Cost of fencing the property 110,000
Paid to a contractor for building erected 2,000,000
Building permit fee 20,000
Excavation expenses 50,000
Architects fees 50,000
Invoice cost of machines acquired 2,000,000
Freight, unloading and delivery charges 60,000
Custom duties and other charges 140,000
Allowances, etc. to technicians during
installation 400,000
Balances, December 31, 2009 P120,000 P3,020,000 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 are charged to operating expense for the period.
Land account balance at December 31, 2012 is computed as follows (for discussion only):
Cash paid P2,500,000
Mortgage assumed 4,000,000
Legal fees, taxes and documentation expenses 50,000
Payment to squatters to vacate premises 100,000
Cost of tearing down building 120,000
Salvage from old building demolished (150,000)
Balance, January 1, 2012 700,000
Balance, December 31, 2012 P7,320,000
5-11 (Far East Company)

a. Direct materials P220,000
Direct labor 150,000
Overhead costs (125% x 150,000 187,500
Allocated fixed costs (20% 700,000) 140,000
Total before interest cost P697,500
Capitalized interest: (300,000 x 10% x 6/12) (specific borrowing) 15,000
Total cost of equipment P712,500
b. Average accumulated expenditures: (697,500/2) P348,500
Capitalized interest:
Specific borrowing 300,000 x 10% x 6/12 P 15,000
General borrowings 48,750 x 16% x 6/12 3,900
Total capitalized interest P 18,900
5-12 (Metro Company)

a. 4,000,000 x 10% P400,000
Less interest income earned on temporary investment of loan ( 85,000)
Capitalized interest P315,000
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b. 1,000,000 x 10% P100,000

1,000,000 x 10% x 9/12 75,000
1,000,000 x 10% x 6/12 50,000
1,000,000 x 10% x 3/12 25,000
Total interest P250,000
Less interest income earned on temporary investment of loan 40,000
c. Computation of average accumulated expenditures:

400,000 x 12/12 P 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
Computation of weighted average interest rate:
(10% x 1,200,000) + (12% x 1,600,000) 11.14%
1,200,000 + 1,600,000
Interest of specific borrowing:
1,600,000 x 10% P160,000
Less interest earned 20,000 P140,000
Interest on general borrowing:
300,000 x 11.14% 33,420
d. 2,800,000 x 10% P280,000

1,600,000 x 10% 160,000
2,000,000 x 12% 240,000
Total interest on loans P680,000
Less capitalized interest: (1,900,000 x 10.625%*) 201,875
Interest expense for 2012 P478,125
* 680,000 6,400,000 = 10.625%
5-13 (Lim Company)

360,000 x 12/12 P 360,000
600,000 x 7/12 350,000
1,500,000 x 6/12 750,000
1,500,000 x 1/12 125,000
a. Interest of specific borrowing (3,000,000 x 12%) P 360,000

Less interest revenue earned from temporary investments of
specific borrowing 49,000
Capitalized interest P 311,000
b. Interest on specific borrowing (1,200,000 x 12% ) P 144,000

Less interest revenue earned from temporary
investments of specific borrowing 49,000
P 95,000
Interest on general borrowings
385,000* x 12.14%** 46,739
Capitalized interest P 141,739
* 1,585,000 1,200,000 = 385,000
** 680,000 5,600,000 = 12.14%
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5-14 (Alondra Corporation)
(a) Average accumulated expenditures:

4,000,000 x 12/12 P4,000,000
8,000,000 x 9/12 6,000,000
12,200,000 x 6/12 6,100,000
8,800,000 x 3/12 2,200,000
7,000,000 x 0/12 ------
Average interest rate

12%(17,000,000) + 10%(12,000,000) + 12%(14,000,000) = 11.44%
17,000,000 + 12,000,000 + 14,000,000
Capitalized interest is 11.44% x P18,300,000 (lower than actual interest cost)

= P2,093,520
(b) Total cost of buiding = Total construction cost + capitalized interest cost
= P40,000,000 + P2,093,520 = P42,093,520
5-15 (Pifer Corporation)
(a) Materials 1,250,000

Overhead 2,200,000 (150% x 1,000,000) 700,000
Total 2,200,000
(b) Materials 1,250,000

Overhead (2,200,000 x 250/1,250) 440,000
Total 1,940,000
5-16 (Pioneer Development Corporation)
(a) Land 3,000,000

Cash 50,000
Unearned Income from Government Grant 2,950,000
Building 15,000,000
Cash 15,000,000
Depreciation Expense 750,000

(15,000,000/20 years)
Unearned Income from Government Grant 147,500

Income from Government Grant 147,500
(2,950,000/20 years)
(b) Property, Plant and Equipment

Land 3,000,000
Less Unearned Income from Government Grant 2,802,500
197,500
45
Alternatively, the unearned income from government grant may be presented as part of
the entitys liabilities.
5-17 (Tan Company)

a. Depreciation charges for 2012 and 2013
2012 2013
1. SL (800,000 80,000) / 8 = 90,000
90,000 x 9/12= 67,500 90,000
2. Hrs 720,000/100,000 hrs = 7.20/hr.
worked 7.20 x 4,500 hrs = 32,400 7.20 x 5,500 hrs = 39,600
3. Units of 720,000/900,000 units = 0.80/unit
output 0.80 x 40,000 units = 32,000 0.80 x 60,000 units = 48,000
4. SYD 720,000 x 8/36 x 9/12 = 120,000 720,000 x 7.25/36 =145,000
5. DDB 2/8 = 25% 800,000-150,000=650,000
25% x 800,000 x 9/12=150,000 25% x 650,000 = 162,500
6. 150% 1.5/8 = 18.75% 800,000-112,500=687,500
DB 18.75% x 800,000 x 9/12= 112,500 18.75% x 687,500) =
128,906
b. Carrying amount of the asset at the end of 2013

Depreciation Method Cost Accum. Depr. Carrying amount
1. Straight-line 800,000 157,500 642,500
2. Hours worked 800,000 72,000 728,000
3. Units of output 800,000 80,000 720,000
4. SYD 800,000 265,000 535,000
5. DDB 800,000 312,500 487,500
6. 150% declining balance 800,000 241,406 558,594
5-18 (De Oro Company)

a. Method 1 - Straight-line method
Method 2 - Sum-of-the-years digits method
320,000 80,000 = 4 year life
320,000 x 4/10 = 128,000
320,000 x 3/10 = 96,000
Method 3 - 150% declining-balance method
1.5 4 = 37.5%
37.5% x 340,000 = 127,500
37.5% x (340,000-127,500) = 79,688
b. Straight line method P80,000

Sum-of-the-years digits method
320,000 x 2/10 64,000
150% declining balance method
37.5% x (340,000-127,500-79,688) 49,804
5-19 (Real Company)

a. 2/5 = 40%; 26,400 40% = 66,000
b. 12,000 x 5 years = 60,000; 66,000 60,000 = 6,000
c. Carrying amounts, end of year 3
Straight-line (66,000 36,000) = P30,000
Sum-of-the-years digits(66,000 48,000 ) = P18,000
Double-declining balance (66,000 52,744) = P13,256
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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.
5-20 (Citi Company)

a. Depreciation Expense for 2012
Double-declining balance method
800,000 x 25% x P100,000
720,000 x 8/36 x 1/2 80,000
Depreciation Expense for 2013

Double declining
700,000 x 25% P175,000
720,000 x 8/36 x 1/2 P80,000

720,000 x 7/36 x 70,000 P150,000
b. Carrying (book) value at December 31, 2013

Double-declining balance method
Date Depreciation Expense for the year CV, end
12/31/12 800,000 x 25% X = P100,000 P700,000
12/31/13 700,000 x 25% = 175,000 525,000
Sum of the years digit method

Cost P800,000
Accumulated Depreciation, 12/31/13 (720,000 x 11.5/36) 230,000
Carrying value, 12/31/13 P 570,000
5-21 (Asiaplus Corporation)

(a) Depreciation Expense Equipment 19,200
Accumulated Depreciation - Equipment 19,200
(82,000-2,000)/10 = P8,000
(33,000-3,000)/6 = 5,000
(22,000-1,000)/7 = 3,000
(18,000 -2,000)/5 = 3,200
Total P19,200
(b) Cash 5,000

Accumulated Depreciation Equipment (3,200 x 4) 12,800
Loss on Sale of Equipment Part 200
Equipment 18,000
(c) Equipment 20,000

Cash 20,000
(d) Depreciation Expense Equipment 19,200

Accumulated Depreciations Equipment 19,200
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Depreciation for 2013 (additional discussion)

Components 1 3 = P16,000
Component 4 = 20,000/5 4,000
Total depreciation for P20,000
5-22 (Total Company)

1. The company changes to the sum-of-the-years digits method
Cost P1,200,000
Less accumulated depreciation (1,100,000 10) x 4 440,000
Carrying amount of the asset, beginning of 5th year P 760,000
Revised depreciation for the 5th year
760,000-100,000 = 660,000; 660,000 x 6/21 P 188,571
2. It was estimated that the assets remaining life is 5 years.

Revised depreciation for the 5th year
(760,000 100,000) / 5 years P 132,000
5-23 (Chartered Company)

Cost P 32,000
Less accumulated depreciation 30,000 x (5+4) / 15 18,000
Carrying amount, January 1, 2012 P 14,000
Depreciation expense for 2009 (14,000 x 7/28) P 3,500
5-24 (Standard Company)

Cost P500,000
Less accumulated depreciation:
2008 20% x 500,000 100,000
2009 20% x 400,000 80,000
2010 20% x 320,000 64,000
2011 20% x 256,000 51,200 295,200
Carrying amount, January 1, 2012 P204,800
Depreciation expense for 2012
204,800 10,000 = 194,800; 194,800 5 years P 38,960
5-25 (Koh Trading)

Carrying amount of the asset, January 1, 2012 P153,600
Estimated remaining life in years 8
Depreciation expense for year ended December 31, 2012 P 19,200
5-26 (Carmi Company)

Cost P378,000
Less: Accumulated Depreciation, August 1, 2012(378,00035,000)/5 x 2 137,200
Carrying value, August 1, 2012 P240,800
Overhaul costs (capitalized) 80,000
Carrying value after overhaul P320,800
Depreciation (August December 31, 2012 see below) 22,567
Carrying value, December 31, 2012 P298,233
Depreciation for 2012
(378,000 35,000)/5 x 7/12 P40,017
(320,800 50,000) / (5 2) + 2 = 270,800 / 5 x 5/12 22,567
Total P62,584
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5-27 (Chu, Inc.)

Accumulated depreciation at January 1, 2012 (528,000 x 4/8) P264,000
Revised depreciation expense for 2012
528,000-264,000 = 264,000; 264,000 / 2 yrs. 132,000
Accumulated depreciation at December 31, 2012 P396,000
5-28 (Lu Company)

January 1, 2012
Impairment Loss Machinery 131,250
Cost P500,000
Accumulated Depreciation 1/1/12 168,750
Carrying value 1/1/12 331,250
Recoverable amount 200,000
Impairment loss P131,250
December 31, 2012

Depreciation Expense (200,000 20,000) /2 90,000
5-29 (Island Souvenirs)

a. Value in use (1,500,000 700,000) x 3.7908 3,032,640
Residual value (500,000 x 0.6209) 310,450 3,343,090
b. Carrying value (9,000,000 1,500,000) 7,500,000

Recoverable amount (higher between 3,200,000 and
3,343,090) 3,343,090
Impairment loss 4,156,910
c. Revised annual depreciation

(3,343,090 500,000) / 5 years 568,618
5-30 (Twin Head Corporation)
(a) Depreciation expense 2010 2011

5,600,000 / 16 years 350,000 350,000
(b) December 31, 2011

Depreciation Expense 350,000
Accumulated Depreciation 2,100,000

Recovery of Previous Impairment 2,100,000
Recoverable amount 7,500,000

Carrying value (5,600,000 700,000) 4,900,000
Increase in value 2,600,000
Limit on recovery:
Impairment loss 2,400,000
Recovered impairment
2,400,000 / 16 years = 150,000; 150,000 x 2 years 300,000
Limit on recovery 2,100,000
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(c) Cost 10,000,000

Accumulated depreciation (4,400,000 + 700,000 2,100,000) 3,000,000
Carrying amount, December 31, 2011 7,000,000
To check: Limit on carrying value without impairment

10,000,000 x 14/20 7,000,000
(d) Depreciation expense for 2012

7,000,000 / 14 years 500,000
5-31
a.
01/01/10 Equipment 2,000,000
Revaluation Surplus 1,200,000
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
b.
12/31/10 Depreciation Expense 600,000
3,600,000 6 yrs = 600,000
12/31/10 Revaluation Surplus 200,000

Retained Earnings 200,000
1,200,000 6 yrs = 200,000

12/31/11 Revaluation Surplus 200,000

c.
1/1/12 Accumulated Depreciation-Equipment 600,000
Revaluation Surplus 400,000
Equipment 1,000,000

2,000,000 4 yrs = 500,000

1,200,000-200,000-200,000-400,000=400,000
400,000 4 yrs = 100,000
Original 1/1/10 1/1/10 2010 12/31/11 1/1/12 1/1/12 12//31/12

and
2011
Cost 4.000M +2.00M 6.000M - 6.00M -1.00M 5.00M 5.00M
Accum 1.600M +0.80M 2.400M +1.20M 3.60M -0.60M 3.00M 3.50M
CV 2.400M +1.20M 3.600M -1.20M 2.40M -0.40M 2.00M 1.50M
50
5-32 (Samsung Company)

1/1/07 Machinery 3,600,000
Cash 3,600,000
12/31/07 Depreciation Expense (3,600,000/10) 360,000


Machinery 300,000
Cost Revalued Increase
Machinery 3,600,000 3,900,000 300,000
Accumulated Depreciation 720,000 780,000 60,000
Net 2,880,000 3,120,000 240,000
12/31/09 Depreciation Expense (3,120,000 / 8 years) 390,000


Retained Earnings (390,000 360,000) 30,000


Retained Earnings (390,000 360,000) 30,000
12/31/10 Accumulated Depreciation 220,000

Revaluation Surplus (240,000 30,000 30,000) 180,000
Revaluation Loss 150,000
Machinery 550,000
New Rev Ledger Bal Decrease
Machinery 3,350,000 3,900,000 550,000
Accumulated Depreciation 1,340,000 1,560,000 220,000
Net 2,010,000 2,340,000 330,000


Machinery 1,150,000
Recovery of Previous Revaluation Loss (P & L) 100,000
Increase in asset value 460,000

Unrecovered revaluation loss
Initial revaluation loss 150,000
Recovered through lower depreciation
150,000 / 6 = 25,000; 25,000 x 2 years 50,000 100,000
Revaluation surplus 360,000
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New Rev Ledger Bal Increase

Machinery 4,500,000 3,350,000 1,150,000
Accumulated Depreciation 2,700,000 2,010,000 690,000
Net 1,800,000 1,340,000 460,000
Check:
Carrying value based on cost (no revaluation loss)
(3,600,000 x 4 years) / 10 years 1,440,000
Revalued amount, 12/31/10 1,800,000
12/31/13 Depreciation Expense 1,800,000/4 450,000

Revaluation Surplus (360,000 / 4 years) 90,000

5-33 (Coco Company)

(a) Cost P300,000
Accumulated depreciation 12/31/11 300,000/10 x 2 ( 60,000)
Carrying amount 12/31/11 before impairment P240,000
Impairment loss P 48,000
(b) Carrying value 12/31/11 after impairment P192,000

2012 depreciation (192,000/8) ( 24,000)
Carrying amount 12/31/ 12 before recovery P168,000
(c) Carrying amount before recovery of impairment P168,000

New recoverable amount 222,000
Increase in value P 54,000
Limit on recovery
Previoius impairment P48,000
Recovered in 2012 (30,000 24,000) (6,000)
Limit on recovery P42,000
Impairment recovery to be recognized at 12/31/12 P 42,000
5-34 (Lakers, Inc.)

(a) Cost P100,000
Accumulated depreciation 12/31/09 100,000/10 ( 10,000)
Net 90,000
Revalued amount 112,500
Revaluation surplus 12/31/09 P 22,500
(b) Carrying amount 12/31/11 112,500 x 7/9 P 87,500

Decrease in value P 20,125
Remaining balance of Revaluation Surplus (22,500 x 7/9) ( 17,500)
Impairment loss in profit or loss P 2,625
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(c) As of 1/1/12 P67,375

Depreciation expense for 2012 67,375/7 ( 9,625)
Net before revaluation on 12/31/12 57,750
Revalued amount 73,000
Increase in value P15,250
Unrecovered impairment loss (2,625 x 6/7) ( 2,250)
Revaluation surplus, December 31, 2012 P13,000
To check: CV without impairment, cost model

100,000 x 6/10 P60,000
Revaluation surplus, December 31, 2012 13,000
Revalued amount, December 31, 2012 P73,000
5-35 (Allied Company)

Purchase price P4,450,000
Residual value ( 650,000)
Development costs incurred and capitalized during 2010 750,000
Depletable cost 1/1/11 P4,550,000
Estimated supply of mineral resources 3,500,000
Depletion expense per ton in 2011 P 1.30
Number of tons removed during 2011 x 550,000
Depletion expense for 2009 P 715,000
Depletable cost, January 1, 2011 (see above) P4,550,000

Less depletion expense for 2009 ( 715,000)
Add development costs incurred and capitalized during 2012 961,000
Depletable cost for 2012 P4,796,000
Revised estimated supply of mineral resource, 2012 4,360,000
Revised depletion rate per ton P 1.10
Number of tons removed during 2012 700,000
Depletion expense for 2012 P 770,000
5-36 (Ong Exploration Company)

Purchase price P45,000,000
Development costs 1,500,000
Salvage value ( 6,000,000)
Restoration costs at present value (2,500,000 x 0.4632) 1,158,000
Depletable cost P41,658,000
Estimated recovery from the property 10,000,000
Depletion rate per metric ton P 4.1658
Resources extracted during 2011 x 1,000,000
Depletion expense for 2011 P 4,165,800
Depletable cost, 2011 (see above) P41,658,000

Depletion expense for 2011 ( 4,165,800)
Development costs in 2012 750,000
New depletable cost for 2012 P38,242,200
Remaining number of metric tons (9,250,000-1,000,000) 8,250,000
Revised depletion per metric ton (rounded) P 4.64
Number of metric tons removed during 2012 x 1,500,000
Depletion expense for 2012 P 6,960,000
53
5-37 (Family Mining Company)

Depletion rate per ton:
4,000,000 + 400,000 200,000
1,400,000 tons P3.00
Depreciation expense per ton:
300,000 20,000
1,400,000 tons P0.20
a. Cost of ending inventory
2,000 units x 6 months 12,000
Production cost per unit
(8.00 + 3.00 + 0.20) x 11.20
Ending Inventory, December 31, 2011 P134,400
b. Cost of goods sold
18,000 units x 6 months 108,000
Production cost per unit x 11.20
Cost of goods sold for 2011 P1,209,600
c. Depletable cost in 2011 P4,200,000
Less depletion expense for 2011
20,000 units x 6 months 120,000
Depletion rate per ton x 3.00 360,000
New depletable cost for 2012 P3,840,000
Revised estimated recovery at January 1, 2012 800,000
Revised depletion rate for 2012 P 4.80
Depreciable cost in 2011 P 280,000

Less depreciation expense for 2011 (120,000 units x 0.20) ( 24,000)
Depreciable cost for 2012 P 256,000
Revised estimated recovery at January 1, 2012 800,000
Revised depreciation rate for 2012 P 0.32
5-38 (Yap Machine Shop)

a.
1. Cash 1,700,000
Loss on Disposal of Assets 150,000
Land 800,000
Building 1,500,000
2. Cash 120,000
Loss on Disposal of Assets 30,000
Equipment 400,000
3. Equipment 298,000
Cash 298,000
4. Land 8,000,000
Income from Donated Asset 7,800,000
Cash 200,000
5. Income from Donated Asset 240,000

Cash 240,000
54
6. Equipment 150,000
Gain on Disposal of Assets 22,000
Equipment 40,000
Cash 103,000
7. Building 28,000,000
Cash 28,000,000
b.
Property, Plant and Equipment (Net)
Beginning balance 2,150,000 (1) 1,850,000
(3) 298,000 (2) 150,000
(4) 8,000,000
(6) 125,000
(7) 28,000,000
Total 38,813,000 Total 2,000,000
Balance 36,573,000
5-39 (Pat Corporation)

a. Depreciation and amortization expense for year ended December 31, 2012
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. Gain ( loss) from disposal of assets

Car traded in
Fair value of car traded in (240,000 200,000) P 40,000
Book value of car traded 54,000 P(14,000)
Machine destroyed by fire
Insurance recovery P155,000
Book value of machine (230,000 x 4/10 ) 92,000 63,000
Net gain from disposal of assets P 49,000
55
MULTIPLE CHOICE QUESTIONS

Theory
MC1 D MC6 D MC11 D MC16 D MC21 C
MC2 D MC7 D MC12 B MC17 C MC22 B
MC3 C MC8 B MC13 B MC18 A MC23 C
MC4 D MC9 C MC14 D MC19 B MC24 C
MC5 A MC10 B MC15 D MC20 D MC25 C
Problems
MC26 D
MC27 B
MC28 B
MC29 D
MC30 B
MC31 D Cost is FV of trading securities exchanged = 1,000 x 34 = 34,000
MC32 D 14,400,000 x 5/20 = 3,600,000
MC33 C 200,000 + 3,000 + 6,000 = 209,000
MC34 D (800,000 20,000) x 12/78 x 9/12 = 90,000
MC35 C 780,000 x 11.25/78 = 112,500; 90,000 + 112,500 = 202,500
800,000 202,500 = 597,500
MC36 A 4,500,000 + 30,000 + 6,000 + 40,000 + 60,000 = 4,636,000 Land
10,000 + 50,000 + 90,000 + 45,000 + 150,000 + 9,800,000 = 10,145,000 Building
MC37 C 1,800,000 x 10% = 180,000; 180,000 45,000 = 135,000
2,500,000 1,800,000 = 700,000
700,000 x 9% = 63,000; 135,000 + 63,000 = 198,000
MC38 C 4,000,000 x 10% x 6/12 = 200,000
750,000 x 12% x 6/12 = 45,000; 200,000 + 45,000 = 245,000
MC39 C 1,000,000 + (4,000,000 2) = 3,000,000; 2,000,000 x 10% = 200,000
1,000,000 x 11% = 110,000; 200,000 + 110,000 = 310,000
MC40 A 4,500,000 + 1,320,000 + 77,000 + 53,000 = 5,950,000 total depreciable cost
112,500 + 66,000 + 9,625 + 13,250 = 201,375 total depreciation expense
5,950,000 201,375 = 29.5 yrs.
MC41 A 4,800,000 + 1,400,000 + 82,000 + 53,000 = 6,335,000 total cost
201,375 6,335,000 = 3.18%
MC42 D 4,500,000 40 yrs. = 112,500
MC43 C 77,000 x 6/36 = 12,833
MC44 A 240,000 12,000 = 228,000; 228,000 120 mos = 1,900 per mo
1,900 x 63 mos = 119,700
240,000 119,700 = 120,300; 120,300 130,000 = 9,700
MC45 C 270,000 x (8+7)/36 = 112,500
270,000 8 = 33,750; 33,750 x 2 = 67,500
112,500 67,500 = 45,000
MC46 B 1.5/5 = 30% depreciation rate; 600,000 x 30% x = 90,000
600,000 90,000 = 510,000; 510,000 x 30% = 153,000
MC47 A 90,000 x (5+4+3)/15 = 72,000 reported accum depreciation under SYD
90,000 x 2/15 = 12,000
MC48 B 240,000 40 = 6,000; 240,000 x .90 x.90 x .10 = 19,440; 72,000 x 2/10 = 14,400
MC49 C 160,000/4 = 40,000; 400,000/40,000 = 10 years
240,000 40,000 = 200,000; 200,000 65,000 = 135,000
MC50 D (900,000 300,000) / 3 yrs = 100,000
600,000 + 100,000 = 700,000
MC51 A 900,000 420,000 = 480,000; 480,000 300,000 = 180,000
56
MC52 D 42,000 x 55 = 2,310,000; 2,310,000/7 = 330,000; 330,000 + 5,000 = 335,000

MC53 C 49,200,000 43,755,000 = 5,445,000; 5,445,000 4.5 years = 1,210,000/yr
1,210,000 x 40 yrs = 48,400,000; 49,200,000 48,400,000 = 800,000
MC54 C 20,000 FV cash received 3,000 = 17,000 cost;
40,000 30,000 = 10,000; 20,000 10,000 = 10,000 Gain
MC55 B 20,500 6,000 = 14,500; 14,500 16,800 = 2,300
MC56 C 54,000,000 6,000,000 + 7,200,000 = 55,200,000; 55,200,000 2,400,000 = 23
MC57 A 3,400,000 200,000 + 800,000 = 4,000,000
4,000,000 4,000,000 = 1.00 per ton; 1.00 x 375,000 tons = 375,000
MC58 D P0 for Quarry No. 1 since the asset is only being leased.
1,000,000 300,000 = 700,000; 700,000 100 M = 0.007 per ton
0.007 x 1,380,000 = 9,660
MC59 B .007 x 40,000,000 = 280,000; 700,000 280,000 = 420,000
420,000 20,000,000 = 0.21; 0.21 x 1,380,000 = 28,980
MC60 B 3,600,000 800,000 = 4.50; 4.50 x 60,000 = 270,000
96,000 6,000 = 90,000; 90,000 800,000 = 0.1125
0.1125 x 60,000 = 6,750
MC61 C (8,600,000-600,000) 40 yrs = 200,000; 200,000 x 5 yrs. = 1,000,000
8,600,000-1,000,000-600,000 = 7,000,000; 7,000,000 30 yrs = 233,333
MC62 D 8,000,000 1,000,000 233,333 = 7,366,667
7,500,000 7,366,667 = 133,333
MC63 C 160,000 x 10 yrs = 1,600,000; 4,000,000 1,600,000 = 2,400,000
3,240,000 2,400,000 = 840,000
MC64 B 4,000,000 160,000 = 25 years; 25 10 = 15 years remaining
3,240,000 15 = 216,000
MC65 B 160,000 x 9 yrs. = 1,440,000; 4,000,000 1,440,000 = 2,560,000
2,560,000 500,000 = 2,060,000; 2,060,000 16 yrs. = 128,750
2,060,000 128,750 = 1,931,250; 3,240,000 1,931,250 = 1,308,950
160,000 128,750 = 31,250; 500,000 31,250 = 468,750
1,308,750 468,750 = 840,000
MC66 A (360,000 6) x 2.5 yrs = 150,000
360,000 150,000 = 210,000 book value; 210,000 70,000 = 140,000 loss
MC67 D 70,000 3.5 remaining years = 20,000; 70,000 20,000 = 50,000
MC68 C 1,800,000 600,000 = 1,200,000; 600,000 3 = 200,000
1,200,000 + 200,000 = 1,400,000
MC69 C 3,000,000 300,000 = 2,700,000; 2,700,000 10 = 270,000
270,000 x 4 = 1,080,000
3,000,000 1,080,000 = 1,920,000; 1,920,000 900,000 = 1,020,000
MC70 B 1,920,000 6 yrs = 270,000 or 2,700,000 10 yrs = 270,000
57

Fin Ac Robles Empleo CH 5 Vol 1 Answers2012

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Fin Ac Robles Empleo CH 5 Vol 1 Answers2012

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CHAPTER 5

PROPERTY, PLANT AND EQUIPMENT

5-1 a. Cash price is the cost. P215,000

c. Purchase price P22,000,000

e. Purchase price 154,560/1.12 P138,000

5-2 (Uy Company)

5-3 (Chang Corporation)

5-4 (Planters Company and Producers Company)

Books of Producers Company

Books of Planters Company

5-5 (Abatis Forwarders)

5-6 (Business Processing, Inc.)

Equipment (new) 55,000

5-8 (Urban Corporation)

Fixed overhead allocated to building

5-9 (Doy Company)

5-10 (Yu Corporation)

5-11 (Far East Company)

5-12 (Metro Company)

b. 1,000,000 x 10% P100,000

c. Computation of average accumulated expenditures:

d. 2,800,000 x 10% P280,000

* 680,000 6,400,000 = 10.625%

5-13 (Lim Company)

a. Interest of specific borrowing (3,000,000 x 12%) P 360,000

b. Interest on specific borrowing (1,200,000 x 12% ) P 144,000

5-14 (Alondra Corporation)

(a) Average accumulated expenditures:

Average interest rate

Capitalized interest is 11.44% x P18,300,000 (lower than actual interest cost)

5-15 (Pifer Corporation)

(a) Materials 1,250,000

(b) Materials 1,250,000

5-16 (Pioneer Development Corporation)

(a) Land 3,000,000

Depreciation Expense 750,000

Unearned Income from Government Grant 147,500

(b) Property, Plant and Equipment

5-17 (Tan Company)

b. Carrying amount of the asset at the end of 2013

5-18 (De Oro Company)

b. Straight line method P80,000

5-19 (Real Company)

5-20 (Citi Company)

Depreciation Expense for 2013

Sum-of-the-years digits method

720,000 x 8/36 x 1/2 P80,000

b. Carrying (book) value at December 31, 2013

Sum of the years digit method

5-21 (Asiaplus Corporation)

(b) Cash 5,000

(c) Equipment 20,000

(d) Depreciation Expense Equipment 19,200

Depreciation for 2013 (additional discussion)

5-22 (Total Company)

2. It was estimated that the assets remaining life is 5 years.

5-23 (Chartered Company)

5-24 (Standard Company)

5-25 (Koh Trading)

5-26 (Carmi Company)

5-27 (Chu, Inc.)

5-28 (Lu Company)

December 31, 2012