18-38

Beg, balance of the land 700,000.00

cash paid 2,500,000.00
Mortgage assumed on the land bought, including interest,10% 4,000,000.00
Realtor's commission 300,000.00
Legal fees, realty taxes and documentation expenses 50,000.00
Amount paid to relocate persons squatting on the property 100,000.00
Total cost of the land 7,650,000.00 Q1.) B

Beg, Balance -Land Improvement 10,000.00

Cost of fencing property 110,000.00
Total cost of land improvement 120,000.00 Q2.) A

Beg, balance - Building 900,000.00

Amount recovered from salvage of the building demolished (150,000.00)
Cost of tearing down an old building 120,000.00
Amount paid to contractor for the building erected 2,000,000.00
Building permit fees 20,000.00
Excavation expenses 50,000.00
Architects' fees 50,000.00
Total cost of building 2,990,000.00 Q3.) A

Machinery 980,000
Invoice cost of machinery 2,000,000
freight, unloading 60,000
Custom duties 140,000
Allowances during installations 400,000
Total cost of machinery 3,580,000 Q4.) B

Land Improvement 120,000.00

Building 2,990,000.00
Machinery 3,580,000
Total depreciable property 6,690,000.00 Q5.) A
 1
1
1
1
1
1
2

1
1
2

1
1
1
1
1
1
1
2

1
1
1
1
1
2

1
1
1
2
24 POINTS
Weighted Average in 20018

Date Expenditures Months Outstanding Average

1/1/2018 3,000,000 12 36,000,000.00
5/1/2018 1,260,000 8 10,080,000.00
9/1/2018 1,500,000 4 6,000,000.00
Total 5,760,000 52,080,000.00
Divide by, Months 12
Weighted average- Carrying amount 4,340,000.00

Specific borrowings 2,000,000.00 10%

General borrowings
Rate Principal Interest
15% 4,000,000.00 600,000.00
12% 6,000,000.00 720,000.00
Total 10,000,000.00 1,320,000.00

Interest 1,320,000.00
Principal 10,000,000.00
Capitalization rate 0.132

Weighted Average borrowing cost:

Specific borrowings
Actual borrowing cost
Investment Income
General Borrowings
Weighted Average -Carrying Amount
Principal amount of specific borrowings
Weighted Average related to general borrowings
Capitalization rate
Months Outstanding. Months/12
Weighted Average borrowing cost
VS Actual borrowing cost

Capitalizable borrowing cost (LOWER)

Weighted Average in 20019 NOTE: Building was completed on October 1. 2019

Date Expenditures Months Outstanding Average

1/1/2019 6,248,880 9 56,239,920.00
4/1/2019 1,200,000 5 6,000,000.00
8/1/2019 2,400,000 2 4,800,000.00
Total 9,848,880 67,039,920.00
Divide by, Months 9
Weighted average- Carrying amount 7,448,880.00

Specific borrowings 2,000,000.00 10%

General borrowings
Rate Principal Interest
15% 4,000,000.00 600,000.00
12% 6,000,000.00 720,000.00
Total 10,000,000.00 1,320,000.00

Interest 1,320,000.00
Principal 10,000,000.00
Capitalization rate 0.132

Weighted Average borrowing cost:

Specific borrowings
Actual borrowing cost (2,000,000 x10% x9/12)
Investment Income
General Borrowings
Weighted Average -Carrying Amount
Principal amount of specific borrowings
Weighted Average related to general borrowings
Capitalization rate
Months Outstanding. Months/12, 9/12
Weighted Average borrowing cost
VS Actual borrowing cost

Capitalizable borrowing cost (LOWER)

Actual Borrowing cost-2019

Capitalizable borrowing cost-2018
Interest expense-2018

Actual Borrowing cost-2019

Capitalizable borrowing cost-2018
Interest expense-2019

Cumulative actual expenditures

Capitalizable borrowing cost-2019
Total cost of the new building
 200,000.00

Actual borrowing cost:

Interest on general borrowings
200,000.00 interest on specific borrowings
(20,000.00) 180,000.00

4,340,000.00
(2,000,000.00)
2,340,000.00
0.132
1 308,880.00
488,880.00
1,520,000.00

488,880.00 Q1.) B 10 points

ing was completed on October 1. 2019

 200,000.00

Actual borrowing cost:

Interest on general borrowings
150,000.00 interest on specific borrowings
- 150,000.00

7,448,880.00
(2,000,000.00)
5,448,880.00
0.132
3/4 539,439.12
689,439.12
1,140,000.00

689,439.12 Q2.) C 7 POINTS

1,520,000.00
(488,880.00)
1,031,120.00 Q3.) C 2 POINTS

1,520,000.00
(689,439.12)
830,561 Q4.) C 2 POINTS

9,848,880.00
689,439.12
10,538,319.12 Q5.) B 2 POINTS
23 POINTS
1,320,000.00
200,000.00
1,520,000.00
1,320,000.00
200,000.00
1,520,000.00
3/4
1,140,000.00
GROSS METHOD

Total consideration received 25,000,000.00

Useful life of the building 20
Income from government grant 1,250,000.00 Q1.) D

Cost of building 30,000,000.00

Useful life of the building 20
Depreciation expense-2018 1,500,000.00 Q2.) C

NET METHOD

Cost of building 30,000,000.00

Government grant 25,000,000.00
useful life of the building 20
Depreciation expense-2018 250,000.00 Q3.) B

Cost of building 30,000,000.00

Depreciation expense 2018 (1,500,000.00)
CA-12/31/2018 28,500,000.00 Q4.) D

Net cost of the building 5,000,000.00

Depreciation-2018 (250,000.00)
CA.12/31/2018 5,000,000.00 Q4.) A
6 POINTS
GROSS METHOD

Total fair value of the land 5,000,000.00

Useful life of the building 10
Income from government grant 500,000.00 Q1.) B

Cost of factory building 20,000,000.00

Useful life of the building 10
Depreciation expense-2018 2,000,000.00 Q2.) C

NET METHOD

Cost of building 20,000,000.00

Government grant (5,000,000.00)
Net cost of the building 15,000,000.00
useful life of the building 10
Depreciation expense-2018 1,500,000.00 Q3.) D Net method

Cost of building 20,000,000.00

Depreciation expense 2018 (2,000,000.00)
CA-12/31/2018 18,000,000.00 Q4.) A Gross method

Net cost of factory building 15,000,000.00

Depreciation-2018 (1,500,000.00)
CA.12/31/2018 13,500,000.00 Q5.) B Net Method
6 POINTS
Purchase Price 1,200,000
real estate broker's commission 72,000
legal fees 12,000
title guarantee insurance 36,000
1,320,000 Q1.) C

2017
Date Expenditures Months Outstanding Average
1/1/2017 1,000,000 12 12,000,000.00
4/1/2017 500,000 9 4,500,000.00
10/1/2017 800,000 3 2,400,000.00
12/31/2017 900,000 0 -
Total 3,200,000 18,900,000.00
Divide by, Months 12
Weighted average- Carrying amount 1,575,000.00

Specific borrowings 1,000,000.00 12% 120,000.00

General borrowings
Rate Principal Interest
10% 2,800,000.00 280,000.00
10% 3,200,000.00 320,000.00
12% 2,000,000.00 240,000.00
Total 8,000,000.00 840,000.00

Interest 840,000.00
Principal 8,000,000.00
Capitalization rate 0.105

Weighted Average borrowing cost:

Specific borrowings
Actual borrowing cost 120,000.00
Investment Income -
General Borrowings
Weighted Average -Carrying Amount 1,575,000.00
Principal amount of specific borrowings (1,000,000.00)
Weighted Average related to general borrowings 575,000.00
Capitalization rate 0.105
Months Outstanding. Months/12 1
Weighted Average borrowing cost
VS Actual borrowing cost

Capitalizable borrowing cost (LOWER)

Weighted Average in 2018 NOTE: Building was completed on September 1,2018

Date Expenditures Months Outstanding Average

1/1/2018 4,380,375 8 35,043,000.00
5/1/2018 600,000 4 2,400,000.00
9/1/2018 1,200,000 0 -
Total 6,180,375 37,443,000.00
Divide by, Months 8
Weighted average- Carrying amount 4,680,375.00

Specific borrowings 1,000,000.00 12% 120,000.00

General borrowings
Rate Principal Interest
10% 2,800,000.00 280,000.00
10% 3,200,000.00 320,000.00
12% 2,000,000.00 240,000.00
Total 8,000,000.00 840,000.00

Interest 840,000.00
Principal 8,000,000.00
Capitalization rate 0.105

Weighted Average borrowing cost:

Specific borrowings
Actual borrowing cost (2,000,000 x10% x9/12) 80,000.00
Investment Income -
General Borrowings
Weighted Average -Carrying Amount 4,680,375.00
Principal amount of specific borrowings (1,000,000.00)
Weighted Average related to general borrowings 3,680,375.00
Capitalization rate 0.105
Months Outstanding. Months/12, 8/12 2/3
Weighted Average borrowing cost
VS Actual borrowing cost

Capitalizable borrowing cost (LOWER)

Total expenditures-2017
Total expenditures-2018
Capitalizable borrowing cost -2017
Capitalizable borrowing cost-2018
Cost of the building
Total cost of the building
Actual Borrowing cost-2018 960,000.00
Capitalizable borrowing cost-2017 (337,626.25)
Interest expense-2018 622,374

Depreciation Expense:
Cost of the building 6,832,001
150% declining balance 0.0375
Months depreciated, 4/12 1/3
85,400
 cost of razing the building 108,000
Plans, specifications and blueprints 42,000
Architects' fees for design and supervision 164,000
Total cost of building 314,000

Depreciation Expense:
Cost of the building 6,832,001
150% declining balance 0.0375
256,200

estimated useful life:

Straight line rate 100%/40 0.025
Fixed rate 150%x 0.025 0.0375

Actual borrowing cost:

Interest on general borrowings 840,000.00
interest on specific borrowings 120,000.00
120,000.00 960,000.00

60,375.00
180,375.00
960,000.00

180,375.00 Q2.) A
leted on September 1,2018

Actual borrowing cost:

Interest on general borrowings 840,000.00
interest on specific borrowings 120,000.00
80,000.00 960,000.00
2/3
640,000.00

257,626.25
337,626.25
640,000.00

337,626.25 Q3.) A

3,200,000
2,800,000
180,375.00
337,626.25
314,000.00
6,832,001 Q4.) C
Q5.) C

Estimated useful life: -150% declining balance

Straight line rate 100%/40 0.025
Q6.) None of the choices Fixed rate 150%x 0.0 0.0375

29 points
 caacc

252,150 4,050
SEPTERMBER 30 YEAR END

1-Oct-16 Cost of plant 800,000.00

cost of testing the plant 45,000.00
scrap value (5,000.00)
Total cost of plant 840,000.00

Total cost of plant 840,000.00

Residual Value (40,000.00)
Depreciable amount 800,000.00
Estimated useful life 5
Depreciation expense 160,000.00 Q1.) B

Total cost of plant 840,000.00

Accumulated Depreciation, for 2 years (320,000.00)
Carrying amount-2019 520,000.00
New residual value-2019 (70,000.00)
Depreciable Amount 450,000.00
Remaining useful life 3
Depreciation expense-2019 150,000.00 Q2.) A

1-Oct-18 Cost of motor vehicle 270000

Estimated useful life 4
Date of acquisition, months/12 2/3
Accumulated Depreciation 45,000.00

Cost of motor vehicle 270,000.00

Accumulated Depreciation (45,000.00)
Carrying amount of motor vehicle 225,000.00
Carrying amount of old tires (10,000.00)
Cost of new tires 24,000.00
Total cost 239,000.00

Sept 1 to May 30, 2019 45,000.00

June 1-Sept 30 21,500.00
June1 to Sept 30 4,000.00
Depreciation expense 70,500.00 Q3.) D

Cost Residual value

Airframe 800,000.00 0
Interior 100,000.00 0
Engines and rotary blades 400,000.00 30,000
Inspection 240,000.00 0
Total

Cost 280,000
Residual value -40,000
Depreciable amount 240,000
estimated useful life 3
Date of acquisition, months/12- Feb-Sept 30 2/3
Depreciation expense of photocopying machine 53333 1/3
Cost of motor vehicle 12,000.00
Estimated useful life 4
Date of acquisition, months/12 2/3
Carrying amount of old tires 2,000.00

Cost of motor vehicle 12,000.00

Accumulated Depreciation (2,000.00)
Carrying amount of old tires 10,000.00

Estimated useful Depreciation

Depreciable Amount life (in years) expense
800,000.00 10 80,000.00
100,000.00 10 10,000.00
370,000.00 5 74,000.00
240,000.00 3 80,000.00
 244,000.00 Q4.) D

Q5.) B
Consideration received 52,000.00
Cost-Machinery D 140,000.00
Accumulated depreciation
1/1/2018 92,800.00
1/1-05/01 11,600.00 (104,400.00) 35,600.00
Gain on sale 16,400.00 Q1.) A

Accumulated Depreciation 140,800.00

Depreciation expense 26,880.00
Accumulated Deprecition- Machinery R 167,680.00 Q2.) B

Accumulated Depreciation 60,000.00

Depreciation expense 24,000.00
Accumulated Deprecition- Machinery I 84,000.00 Q3.) C

Accumulated Depreciation 64,000.00

Depreciation expense 51,200.00
Accumulated Deprecition- Machinery A 115,200.00 Q4.) A

Depreciation expense:
Depreciation expense- Machine D 11,600.00
Depreciation expense-Machine R 26,880.00
Depreciation expense-Machine I 24,000.00
Depreciation expense-Machine A 51,200.00
Asset N 17,600.00
Total depreciation expense of machinery 131,280.00 Q5.) B
Component depreciation

Purchase Price 1,500,000.00

Delivery and installation 250,000.00
Testing the plant before the production 11,000.00
Total cost of engine 1,761,000.00 Q1.) C

Purchase price 2,000,000.00

Delivery and installation 250,000.00
Testing the plant before the production 11,000.00
Total cost of conveyor belt and fittings 2,261,000.00 Q2.) C

Purchase price 800,000.00

Delivery and installation 250,000.00
Testing the plant before the production 11,000.00
Total cost of outer structure 1,061,000.00 Q3.) C

Engine 231,183.33
Conveyor belt and fittings 259,072.92
Outer structure 308,916.67
Total depreciation of plant 799,172.92 Q4.) A

Engine 252,200.00
Conveyor belt and fittings 282,625.00
Outer structure 337,000.00
Total depreciation of plant 871,825.00 Q5.) B
Fair value 1,400,000.00
legal fees 50,000.00
remodeling cost 100,000.00
Total cost of building 1,550,000.00 Q1.) C

Fair value of asset received 1,200,000

Cash paid (400,000.00)
Fair value of asset given 800,000.00
Carrying Amount:
Cost 1,000,000.00
Accumulated Depreciation (350,000.00) 650,000.00
Gain on exchange 150,000.00 Q2.) A

Office building 1 135,000.00

Office building 2 50,000.00
Office building 3 150,000.00
Factory building 155,000.00
Total depreciation expense 490,000.00 Q3.) C

Total cash received 1,400,000.00

Estimated useful life 10.00
Income from government grant 140,000.00 Q4.) A

Depreciable Amount 945,000.00

sebsquent depreciation (135,000.00)
Book value 1,080,000.00 Q5.) A
 Date Expenditures Average
1/1/2017 2,000,000 12 24,000,000.00
7/1/2018 4,000,000 6 24,000,000.00
11/1/2017 3,000,000 2 6,000,000.00
Total 9,000,000 54,000,000.00
Divide by, Months 12
Weighted average- Carrying amount 4,500,000.00

Specific borrowings 2,000,000.00 10% 200,000.00

General borrowings
Rate Principal Interest
12% 15,000,000.00 1,800,000.00
Total 15,000,000.00 1,800,000.00

Interest 1,800,000.00
Principal 15,000,000.00
Capitalization rate 0.12
Actual borrowing cost 200,000.00
Investment Income -
General Borrowings
Weighted Average -Carrying Amount 4,500,000.00
Principal amount of specific borrowings (2,000,000.00)
Weighted Average related to general borrowings 2,500,000.00
Capitalization rate 0.120
Months Outstanding. Months/12 1
Weighted Average borrowing cost
VS Actual borrowing cost

Capitalizable borrowing cost (LOWER)

Total expenditures-2017 9,000,000.00

Total expenditures-2018 1,000,000.00
Capitalizable borrowing cost-2017 500,000.00
Capitalizable borrowing cost-2018 1,160,000.00
11,660,000.00

Weighted Average in 2018 NOTE: Building was completed on December. 2019

Date Expenditures Months Outstanding Average

1/1/2018 9,500,000 12 114,000,000.00
7/1/2018 1,000,000 6 6,000,000.00
Total 10,500,000 120,000,000.00
Divide by, Months 12
Weighted average- Carrying amount 10,000,000.00

Specific borrowings 2,000,000.00 10% 200,000.00

General borrowings
Rate Principal Interest
12% 15,000,000.00 1,800,000.00
Total 15,000,000.00 1,800,000.00

Interest 1,800,000.00
Principal 15,000,000.00
Capitalization rate 0.12

Weighted Average borrowing cost:

Specific borrowings
Actual borrowing cost (2,000,000 x10% x9/12) 200,000.00
Investment Income -
General Borrowings
Weighted Average -Carrying Amount 10,000,000.00
Principal amount of specific borrowings (2,000,000.00)
Weighted Average related to general borrowings 8,000,000.00
Capitalization rate 0.12
Months Outstanding. Months/12, 9/12 1
Weighted Average borrowing cost
VS Actual borrowing cost

Capitalizable borrowing cost (LOWER)

Cost of machinery and Equipment

Estimated useful life

Cost
Accumulated Depreciation
Carrying Amount
Carrying amount of overhauled truck
Balance
Remaining Eul
Depreciation on remaining delivery truck

Cost
Accumulated depreciation
Carrying amount
Overhauling cost
Adjusted carrying amount
estimated useful life
Depreciation on overhauled delivery truck

Invoice cost
Freight
Installation and testing
Total cost of new delivery truck
Estimated useful life
Annual depreciation
Number of months used
Depreciation on remaining delivery truck

Depreciation on remaining delivery truck

Depreciation on overhauled delivery truck
Depreciation- new delivery truck
Total depreciation

Beg, Balance
Overhauling cost
Cost of new delivery truck
Adjusted csot of delivery truck
Accumulated depreciation
Carrying Amount

Total expenditures-2017
Total expenditures-2018

Borrowing Cost is expensed outright - PFRS for SME

 Actual borrowing cost:
Interest on general borrowings 1,800,000.00
interest on specific borrowings 200,000.00
200,000.00 2,000,000.00

300,000.00
500,000.00
2,000,000.00

500,000.00 Q1.) D

Q2.) C

leted on December. 2019

 Actual borrowing cost:
Interest on general borrowings 1,800,000.00
interest on specific borrowings 200,000.00
200,000.00 2,000,000.00

960,000.00
1,160,000.00
2,000,000.00

1,160,000.00 Q2.) C

3,000,000
1/5
600,000 Q3.) A

1,152,000.00
(432,000.00)
720,000.00
(150,000.00)
570,000.00
5
114,000.00

240,000.00
(90,000.00)
150,000.00
60,000.00
 210,000.00
7
30,000.00

400,000
20,800
40,000
460,800
8
57600
3/7
24000

114,000.00
30,000.00
24,000.00
168,000.00 Q4.) B

1,152,000.00
60,000.00
460,800.00
1,672,800.00
(600,000.00)
1,072,800.00 Q5.) C

9,000,000.00
1,000,000.00
10,000,000.00 Q6.) A
a. PAJE:
Machinery 300,000
Retained Earnings 300,000

Retained Earnings 100,000.00

Accumulated Depreciation 100,000.00

b. Retained earnings 90,000

Accumulated depreciation 120,000
Equipment 210,000

Sales price/Selling price 110,000.00

Carrying Amount (90,000.00)
Gain on sale on equipment 20,000.00
Cash received recorded as other income in 2017 110,000.00
Overstatement of income in 2017 90,000.00

c. Equipment 150,000.00
Retained Earnings 150,000.00

Retained Earnings 25,000.00

Accumulated Depreciation 25,000.00 2 years depreciation

Equipment 150,000.00
Residual value (25,000.00)
Balance 125,000.00
Estimated useful life 10
Depreciation expense 12,500.00
 Machinery 300,000.00
EUL 15
Depreciaiton expense 100,000.00

Carrying Amount:
Cost 210,000.00
Accumulated Depreciation (120,000.00)
90,000.00

2 years depreciation