Property, Plant & Equipment Mintorivut Cost uf Property, Plant and Equipment ¢ Cav havi (6 the canh plice (net af trade discounts and rebates) and dther incidental eosts incurred in connection With thy aequiisitinn plus Necessity Costs incurred to bring. the asset to its present location and condition and to prepare Ayo wyset FoF As Hnteted use Om avcomne subject (0 cast discount ~ ix the purchase price (net of trade discounts and rebates), net of the cash iseuuin whether taken oF NOL and other incidental coats incurred in connection with its acquisition plus necessary unis Incuted to bring the asset to its present location and condition and to prepare the asset for its intended use. ‘Ay instattment (but with w cash price) ~ is the cash price and other incidental costs incurred in connection with its Aquisition pis necessary conte iticurred le brig the asset to its present location and condition and to prepare the asset fave ity dhtoned se Ay a deferred tnetatiment plan (without a cavh price) —is the present or discounted value of all future payments. Ivvnanee af Debt or bigulty securities is the Tair market valu of the asset received or securities issued whichever is ‘eloatly sloterininable Domarton tho ayset received Is initlally meusured at its fair market value with a corresponding credit to Additional Dad Capital/Share Preminn, Dranvfer of PPE from customer - the avvet received is measured at its cost, The deemed cost of that asset is its fair value on the date af the sranster rately Womifiable yervices received by the customer in exchange for the transfer. then the recipient should split the transaction inte separate components ay required by IAS 18, If there is only one component identified, even ty est when the service iy performed (which could, for example, be as soon as access to a utility hhetwoth ty provided) IRIC 1X provides guidance on how to identify the entity's obligation to provide one or more sepimately ilentifiable services in exchange lor the transferred asset - and, therefore, how to recognize revenue: W the are sem © UCthe entity hy only one service obligation, it would recognize revenue when the service is performed. ‘ I the eniity has mare than one separately identifiable service obligation, it should allocate the fair value of the otal consideration received to each service and recognize revenue from each service separately in accordance with TAS 18 © If the entity has an obligation to provide ongoing servi uenetally determined hy the (crs af the agreement with the customer. LF the agreement does not specify a period, the reverie shall he recognized over a period no longer than the usetul life of the transferred asset used to © provide the ongoing servi ‘s the period over which revenue is recognized is Rvchange wih commercial substance + the tair market value of the asset received or asset surrendered whichever is clonrly detwrminible. Gain or tow is recognized in their entirety, : Exchange without commerctat subatance (he asset received is initially measured at car value. Giiin iv not recognized however if there's objective evidence that the Jamwnt OF Impairnient love iy fecinied, Tying value or impaired Aon-cash asset given up is impaired the Amexchunue tramnetion hn» commercial substance when: Hn cash flows a the asset received differ thont the cash flows of the asset transf . 0 transferred is Slunitiownt lative the Lair value of the ayset exchanged and the difference is rat ap ie vale af he prt a the entity's operations aed! by the transaction changes asa result of thw exehinge Ie ninitfiowat eelative Us the fiir value oF the asset exchan nged. ‘The il a the ont OF is ane Ht, ‘et and from its disposal b, Kxamoles of Directly Attributable Cos a Cost of employes bemetity ariaing diteetty from construct siti ert tee ieoalate He directly from construction or acquisition of the item of PPE: © Unitiat delivery and ant ety 4, Unstalintlon aid sxsemnly corte_ pr Plant and Equipme ° r set is Functioning propery, alter deducting the net proceeds trom selling any tems Produced while bringing the asset to c ‘est dyeipmenn) ® Orgiag the asset to that Tocation and condition (such as samples produced when testing the Professional fees les of costs that are not costs of an item of PI Cost of opening a new facility b. Cost of introducing a new product or service (including cost of advertising and promotional activites) Cost of conducting business in a new location or with a new class of customer (including costs of staff training) 4. Administrative and other general overhead costs Subsequent Costs ~the costs of the day today servicing of c rvicing ofan item of property, plant and equipment are recognized in {he profit or lass as they are incurred. Costs of day-to-day are primarily the cost of labor and other consumables, and Tony iclude the cost of smal pars, The purpose of hee expenditures soften described as “pas and maintenance” Parts of some PPE may require replacement at regular intervals. Items of PPE may also be acquired w make a less Frequently recurring replacements or ta make a non-recurring replacements. Such items of PPE ts recognized Goehen itis probable that fumure economic benefit associated with the em of PPE will flow to the entity and the cost ofthe lem can be meusured reliably) but the carrying amount of those part that are replaced ts derecognized (PAS ‘cost less any accumulated depreciation ‘ognition as an asset, an item of PPE shall be carried and any impairment loss. Revaluation Model - after recognition a an asset, an item of PPE. whose fair value can be measured reliably shall be carried at a revalued amount, being its fair value at the date of revaluation less any subsequent accumulated depreciation and any subsequent impairment losses, Revaluation shail be made with sufficient regularity to ensure that the carrying amount does not differ materially from that which would be determined using fair value at balance sheet date. A ~ is the systematic allocation of the depreciable amount of an asset over its useful life Deprec Depreciation of an asset begins when itis available for use, ie when its in the location and condition necessary for it to be capable of operating in the manner intended by management Depreciation of an asset ceases at the earlier of the date that the axset is classified as held for vale (or included in a disposal group that is classified ax held for sale) in accordance with PERS $ and the date that the asset is derecognized. Therefore, depreciation does not cease when the asset becomes idle or retired from active use unless ‘the asset éx fully depreciated. However, under the usage methods of depreciation, the depreciation can be zero while there is no production. ‘The residual value and the useful hfe of an asset shall be reviewed at least at each financial year-end and, if ‘expectations differ from previous estimates, the changets) shall be accounted for as a change in an accounting estimate. Depreciation is recognized even ifthe fair value of the asset exceeds its carrying value, as long as the asset's residual value does not exceed its carrying amount. ‘The depreciation amount of an asset is determined after deducting ts residual value. In practice, the residual value ofan asset is often insignificant and therefore immaterial inthe calculation of the depreciable amount The residual value of an asset may increase to an amount equal to oF greater than the carrying value of the asset. Ift does, the asset's depreciation charge is zero uniess and wntl ls residual value subsequently decreases to an amount below the asset's carrying umount The depreciation method applied (0 an asset shall be reviewed atleast at each financial year-end, if there has been a signifiean change In the expected pattern of consumption of the future economic benefits emberled in the unseh the method shall be changed to reflect the changed patern, Such a change shall be accounted for us a change ‘accounting estimate in accordance with PAS 8. when: DDerscogniton ~an item of property plant and equipment shoul be derecogni: a) tis disposed of +b) No future economic benefits are expected from its use oF disposal,(_Lews on Derecognition: TASPAS 16 requires inat the gain oF loss on derecognition of an item of property, plant and equipment is the itterence termeen the estimated net disposal proceeds and the carrying amount. The consideration receivable or received ts measured at fax value. Therefore. if payment is deferred. the consideration is recognized at the cash price equivaient, The difference between the cash price equivalent and the actual amount of receivabie is treated as interest receivable under TASIPAS 18 over the period of credit. The gain or loss is reported in the profit or loss for the period sa wich dereongiton accrs, The only exception is where IASIPAS 17 requis. diferc!tetment on sake and caschack Exploration and evaluation (E&F) assets — are merely those F&F expenditures that have been capitalized a assets in accordance with the entity's accounting policy. Exploration and evaluation expenditures relates to costs incurred on the exploration and evaluation of [potential mineral reserves and resources and includes cost such as exploratory drilling and sample testing and the costs ‘of pre-feastulity studies, Exploration and evaluation expenditure for each arca of interest ether than that acquited from the purchase of another mining company’ is carried forward as an asset provided that one of the following, conditions is met # Such costs are expected to be recouped in full through successful development and exploration of the area of interest ‘or alternatively. y its sale: o¢ + Expiocation and evaluation activities in the area of interest have not yet reached w stage which permits a reasonable asccsument of the existence oF otherwise of economically recoverable reserves and active and significant operations fn relation fo the area are continuiny or planned for the Future Purchased exploration and evaluation assets are recognized as assets at their cost of acquisition or at fair value if purchased as pan of a business combination Measurement of exploration and evaluation assets: Initial recognition measurement — exploration and evaluation assets shall be measured at costs Elements of cost of exploration and evaluation assets The following expenditures that might be included in the initial measurement of exploration and evaluation asset (the ist is not exhaustive) a) acquisition of rights to explore b)_toposraphical. zealogical, geochemical and geophysical studies €) exploratory drilling d) trenching, ©) sampling . {) activitics in relation to evaluating the technical feasibility and commercial viability of extracting a mineral resource Casts related to ctivities undertaken prior to commencement of E&E activities, which is presumed ta be before the oman. has obuained the legal rights to explore a specific area, and casts incurred for the development of mineral resources ater the EAL phase are not covered by the standard and therefore should be accounted for in serordunce with other applicable IFRS and the Framework Im practice. ths usualy results in the immediate Capemsing sf costs incurred prior w obtaining exploration licenses and the treatment of development costs as invanerbie assers accounted for under AS 38 Intangible assets Obligat moval and restoration: Obligations for removal and f accordance with IAS, 437 Provisions, contingent Habilites and contingent assets... This means if an entity has an obligation to restore an area of interest damaged by its L&E activities in that area, it must recognize a liability for that restoration as the related damage is incurred. Exploration and evaluation assets must be measured using the cost or revaluation model. The revitluation model in TAS 58 requires the existence of an active market, whereas the revaluation model in AS 16 only requires that fair value be reliably measurable. Nove that regardles of which model ix selected, cos or revaluation, it must be applled consistentty. Impsirmeat of exploration and evaluation assets: EAL assets shall he assesced for impaurment when facts and circumstances suygest that the carrying amount of an exploration and evaluation asset may exceed its recoverable amount, When facts and circumstances sugges that the earring amount excceds the recoverable amount and entity shall measure. present and disclose any. resuling impairment loss im accordance with 1AS 36 except as provided in IFRS/PERS 6 par. 21 ification of exploration und evaluation assets: ‘An cality shall classify exploration and evaluation assets as tangible or intangible ac acquired and apply the classification consistently. Some explorat ay ein ng to the nature of the assets assels are treated as intangible such as drilling& Rencti cel Ascounting |___ Property, Plant and Equipment — Lect ete ernst are eine SCH a Vile GT rst extent Ma a AMBNe st conse devon ible asset, the amount reflecting that consumption is part of the cost of the inlangible asset lowever, using u tangible asset to develop an intangible asset does not change a tangible asset into an intangible asset Deptet deple systematic allocation of the cost of the natural resource oF wi ‘expense is an adaptation of the productive output method of depreciation, ing asset. The computation of When structures and improvements are constructed in connection with the removal of natural resources and their Usefulness is limited to the duration of the project, it is reasonable to recognize the depreciation on such properties using the output method. However, when the structures and improvements provide benefits expected to terminate prior to the exhaustion of the natural resource, the cost of such improvements should be allocated on the basis of the expected number of units to be extracted or produced during the fife of the improvements or on a time basis, Whichever is more suitable, ‘ Equipment used in the exploration and development activity should be depreciated using the shorter of the life of the natural revouree oF life of the equipment, provided the equipment will be of no use after the natural resource has been totally exhausted, ant use after the natural activity is over, the equipment mS aN asset. at tem oF PPE whose fair value can be measured reliably shall be carried at a revalued amount, being its fair value at the date of revaluation less any subsequent accumulated depreciation and any subsequent impairment losses. Revaluation shall be made with sufficient regularity to ensure that the carrying amount does not differ materially from that which would be determined using fair value at balance sheet date, The frequency of revaluation depends upon the changes in fair values of the items of property, plant and equipment being revalued. When the fair value of a revalued asset differs materially from its carrying amount, a further revaluation is required. Some items of PPE experience significam and volatile changes in fair value, thus, necessitating annual revaluation while items of PPE with only insignificant changes in fair value may be necessary 0 revalue every three or five years When an item of PPE is revalued, any accumutated depreciation at the date of the revaluation is treated in one of the following ways: (a) restated proportionately with the change in the gross carrving amount of the asset $0 that the carrying amount of the asset afier revaluation equals its revalued amount (this method is often used when an asset is revalued by means of applying index to tas depreciated replacement cost), (b) eliminated against the gross carrying amount of the asset and the net amount restated 19 the revalued amount of the asset (this method is often used for buildings). Ian asset's carrying amount is increased as a result of a revaluation, the increase shall be credited directly to equity under the heading revaluation surplus, however, the increuse shall be recognized in profit or loss to the extent that it reverses a revaluation decrease of the same asset previously recognized in profit or lass. Ian asset's carrving amount is decreased asa result of revaluation, the decrease shall be recognized in profit or loss: however, the decrease shall be debited directly to equity under the heading revaluation surplus to the extent of the credit balance existing inthe revaluation surplus in expect ofthat asset The revaluation surplus included in the equity in respect of an item of PPE may be transferred t0 retained earningsvaccumulated profits and losses when the asset is derecognized. This may involve transferring the whole of the surplus when the asset is retired or dispased of. However, some of the surplus may be transferred as the asset is used by an entity. In such a case, the difference between depreciation based on the revalued eurrying amount of the asset and depreciation hased on the asset's original cost shall be transferred direcily to Accumulated Profits & Losses/Retained Earnings. The transfers from revaluation surplus to retained earnings/aceumuluted profits and losses shall be a debit to Revaluation Surplus and a credit to Accumulated Profits é Losses account, Impairment of Assets (Individual Asset) a. Measurement of recoverable amount - is the higher of an asset's fair value loss cost to sell and value in use. b. The recoverable amount is determined for an individual asset, unless the asset does not generate cash inflows from ‘continuing use that ‘are largely independent of those from other assets or proups of assets. If this is the case, recoverable amount is determined for the cash-enerating unit to which the asset belongs, ©. The fair value less cost 10 sell is price in binding sale agreement in an arms length transaction, adjusted for incremental costs that would be directly attributable to the disposal of the asset. If there is no binding sele ‘agreement but an asset is traded in an active market, fair value less cost to sell is the asset's market price fess the ‘costs of disposal. The appropriate market price is usually the current bid price. When current bid prices are unavailable, the price of the most recent transaction may provide a basis from which to estimate fair value tess cost to sell, provided that there has mot been a significant change in economic circumstances between the transaction date and the date as at which the estimate is made (PAS 36, paragraphs 25 und 26)¥ Practical Accounting L Property, Plant and Equipment — Lecture I" theve {sno binding sale agreement oF active market for an asset. fat valuc lees poste ep is based on the best mormation available to reflect the arnoune that an entity coud obtain, atthe balance shee date pone the disposal Fiona te ia trts leneth transactions beween knowledgeable. willing pates after deducting the eee of disposal | In determining this amount, an entity considers the outcome of recent tansactine Ine cing nea toithin the same industry. Fait value tess cost to sell does nol reflect « forced sale, ules mame n compelled to sell immediately (PAS 36, paragraph 2, n mi Cost of disposil. other than those that have already been recognized as liabilities are deducted in determining fair value tess cost to sell. “Example of such costs is legal costs, stamp duty und similar transaction tates. cost of Femoving the asset, and direct incremental costs to bring the asset into conduion Jor sale. Wowever, termination benefits (as defined in PAS 19) and costs associated with as reducing or reorganizing a business following, the disposal of an asset are not direct incremental costs to dispose of the asset 4. Value in use isthe present value of estimated future cash flows expected to arise from the continuing use of an asset and from its disposal at the end of its useful life Estimate of future cash inflows and outflows to be derived from continuing use of the asset and from its ultimate disposal, should include the fotlowing: | Cash outflows that are necessarily incurred to generate the cash inflows from continuing use of the asset {including cash outflows to prepare the asset for use) and that can be reasonably tributed or allocated on a reasonable and consistent basis. Net cash flows, if any. to be received (or paid) for the disposal of the asset atthe end of its useful life. Cash outflows include future overheads that can be altributed or allocated on a reasonable and consistent basis, to the use of the asset. 4. Cash flows for future expenditure necessary to maintain or sustain an asset at its original assessed standard. 5. Cash flows should include the cost savings and other benefits from the restructuring of the asset where the company is committed to the restructuring Estimate Of Future Cash Flows Does Not laclude The Following: : * Cash inflows from assets that generate cash inflows that are largely independent of the cash inflows from the asset under review (ex. Financial assets such as Receivables): + Cash outflows that relate to obligations that have already been recognized as liabilities (ex. Payables, pensions or provisions): ‘¢ Cash flows for future restructuring to which the company is not yet committed: # Cash flows for future expenditure that will improve or enhance the asset in excess ofits original assessed standard ot performance: Cash inflows or outflows from financing activites, Income tax receipts or payments €. The discount rate or rates should be a pretax rate oF rates that refleet(s) current market assessments of the time value of money and the risks specific to the asset £ Ifthe recoverable amount of an asset is less than its carrying amount, the carrying amount should be reduced to its recoverable amount. The reduction is an impairment loss. 1. An impairment loss on a revalued asset is recounized as an expense in the income statement. However, an impairment loss on a revaived asset is recognized directv against any revaluation surplus for the asset to the ‘extent that the impairment loss does not exceed the amount held in the revaluation surplus for that same asset hh. After the recognition of an impairment loss. the depreciation charge for the asset should be adjusted in future periods to allocate the asset’s revised carrying amount. less its residual value (if any) on systematic basis over its remaining useful life. Reversal of impairment Loss (Individual Asset): The increased carrying amount of an asvet other than goodwill attributable to @ reversal of an impairment oss ‘shall not exceed the carrying amount that would have been determined (net of amortization or depreciation, had no impairment toss been recognized for the asset in prior years. A reversal ofan impairment los for an asset other than goodwill shall be recognized immediately in profit or less, tuntess the asset is carried at revalued amount. Any reversal ofan impairment loss of a revalued asses sal be treated asa revaluation increase and credved Wicecly to equity under the heading revaluation sarplc versal of Impairment Loss for an Individual Asset: Cost model - the reversal should not exceed the carrying vaiue that depreciation or amortization) had no impairment loss beew recoen reversal should be recognized immediately in the income statement. would have been determined (net of accumulated zed for the asset in prior years. The amount of Revaluation model the amount of reversal of impairment loss (on a revalued asset is credited directly or the heading revaluation surplus, however, {0 the extent that eae ey kit, an impairment loss on the same asset was previously,Teeognized as an expense in THe Ampaicment loss (Group of Assets): An impairment loss shoud be recognized for a cash-generating unit if and only if, is recoverable amount ofthe unit {zroup of units) is less than is earrying amount of the unit (group of units). The impairment loss should be allocated to reduce the carying amount of the assets oF the unit (group of units) in the Following order: icone statement. A reversal of har impetrmient lass is recog First, to reduce the carrying amount of any goodwill allocated to the cash-generating unit (group of units); and then to the other assets of the unit (group of unis) on a pro-rata basis based on the carrying amount of each asset in the unit (group units). ying amount of an asset should not be reduced below the highest of (ays inable) (b) its value in use (if determinable) and (e) zero. The amount of the impairment loss that would otherwise have been allocated to the asset shall be allocated pro rata to the other assets ofthe unit (roup of units). The goodwill allocated to cash: genet itis edad bore edn the carrying anwant of the trast oF te unt bem for: rating The reversal of an impairment loss for cash generating unit shall be allocated to the assets of the unit, except for goodwill, on u pro rata based om the carrying amounts of those assets, These increates in carrying amounts shall be sreated as reversals of impairment lasses for individual assets and recognized in profit or loss, unless the assets are carried at revalued amount, that any reversal of impairment an revalued usset or assets shall be treated as revaluation increase and credited directly to equity In allocating a reversal of an impairment loss for a cash-generating unit, the carrying amount of an asset shall not be increased above the lower of: (a) its recoverable amount (if determinable), (b) the carrying amount that would ‘have been determined (net of accumulated depreciation or amortization) had no impairment loss been recognized ‘for the asset in prior periods. The amount of reversal of the impairment loss that would otherwise have been allocated to the asset shall be allocated ‘pro rata to the other assets of the unit, except for goodwill Differences between [ERS for SMEs and FULL IFRS. Fe” iape- stint for PPE eld Wor als td joration and evaluation assets Applies to PPE and investment property whose fair| Only applicable to PPE . Investment property carried at | value cannot be measured relably without undue cost | cost is depreviated by following the principles in LAS | oreffort 16 ~ Property, plant and equipment and not reclassified The scope of any replacement part is capitalized if the | Capitalization of replacement parts are based on the replacement is expected to provide ineremenial future | normal recognition eriteria benefits ‘ <1 23] Tf the major components of an item of PPE have| Each part of an idem of PPE with a cost that Ws ignificantly different pattems of consumption of | significant in relation to the total cost of the item must feconiomic benefits, an emtity must allocate the initial | be depreciated separately. ‘cost ofthe aset to its major components and depreciate somponent separately 0 Wg costs are not capital | ring cis ae cpialoed The costo revaluation modal Annual re-asessiient” of” the real idication of changes in the residual value, depreciation | depreciation method, or useful life of an item of PPE is |e rte a an am a | required When an investment property is reclasiied due to'a When an investment propery W relat @ PPE de | relable esimate ofthe property not being determinable | to reliable estimate. of he. property, wot being tvthout unde cost or efor. there is no prescription or | determinable, the residual vale must be’ e70 for ‘on the residual value Tor” depreciation | depreciation purposes | purposes e Sa ek a ‘A plan to dispose of an asset before a previous | Non-current assets’ held “Yor sale are chssifiod | expected dale isan indication of impairm eparately limited to the fai value less cost to sell Piscuewes Fecha 4 Bomaing Ce} Khe cord. of BC capthelized dining ots ae used to Thoth eaten ee eligible Ppecto eeee SENN ‘spenilla/C, Macariola Pro, 1. The ‘additional cost of impor Costs of transporting the asset was PS.000 and cost of preparing the asset for its imended-use include PS,000 installation. How much is the initial cost of the new machine? | | ie ir oy mere ple | imic Company imported a new machine at a peso equivalent of (330.009. The cumpany fas to pay purl bape ing the asset such as P10.Q00 import duies and P15,000*4@CTundablayyarchuse taxes, i elon ca é a. P330,000 . P360,000 H- P350,000 4. 365,000 } : 2. On September 1, 2012, Mendez Corporation purchased anew machine on a deferred payment basis. A down payment of P20,000 was made and 4 annual installments of P60,000 each are to be made bexinning on Septemiber 1, 2012. ‘The cash equivalent price of the machine was,P20,000. Due to an employee strike, Mendes could not install the machine immediately, and thus incurred P3.007F storage coats. Costs of installation (excluding the storage costs) amounted to P8000. The amount to be capitalized asthe cost of the machine is a. P230,000 €. P241,000. jr 238,000 4. P260,000 typical 3 ‘Texture Company purchased a new machinery on January 2, 2012 and incurred the following: Invoice price of machinery, P1,500,000; mn cost ot new ‘Actual cost of removing an (eld machine ‘machine, £25,000. Operati of regular use, P150,000% What is the cost of the new machinery? chuck Mather phen ere hy sb pcwdn, £ 1,475,000 © PIS50,000. &e dev cartes te, or ae 4 Comer Company buys a delivery van with & pax ace of F306,0001 The dealer grants a 15% reduction in list price and an addtional 2% eash discount on the net price if payment is made in 30 days. The company paid an xtra P3QPo have g special hom installed. What amount should the van be intially recorded? fo PESOS Coerev0 KR] LTS!) &- 7253,900 4 . P252,900 a. P256.900 5. On February 2, 2012 Youth Company purchased a machine from Elders Corporation in exchange for a non- interest bearing note requiring eight payments of P80,000. ‘The first payment is to be made on February 2, 2013, and the others are due annually on February 2. At date of issuance, the prevailing rate of interest for thi type of note was 11%, Present value (PV) factors are as follows: Period PY of ordinary annuityof Lat 1% PV of annuity in advance of I at 11% ‘on the new machine, P25,000 7 4.712 $231 8 SMe. 5712 ‘What i the initial carrying amount of the machine tobe reported by Youth Company on February 2, 20127 a. P316,960 ©. Pai8.480 : >. Paiien (8520 x 6M) 4. P456,960 6. On October 1, 2012, Smart Corporation purchases and industria building by an issue of $,000,000 ordinary shares of P1 par each to the vendor. Smart Corporation's shares have been ffctively traded'on the stock exchange but its quoted price has been EEitc.fanging from a low of P3.50 to a high of P1350 for the year. On the date of puree oF the building, Smart]Corporation’s shares are quoted at P8.80. The company paid 220,000 transfer and legal cost jn relation to fhe building At the time of acquisition the industrial building has a Tarr value of P36,000.000,"0n the existing use basis. At what amount should the building be initially recorded? ae} measured reliobly a. 17,720,000 e. P4,220,000 35.20.00 (2H ¢ 220K) d. P67,720,000 pe Candor Company is a mini-conglomerate with many divisions. In 2012, the m commissions its engineering and construction division to build a plant for its manufacturing di 1 i (s manufac ion, The costs incured for the’ plant age as follows: Contractor's cost, P10,500,000; direct materials and Isbor weed ia construction, P8 500,000; engincering and technical overheads, P2.SOn000; mene et de the construction; 2,000,000 and general administrative cons aliceeiee 73,000,000, Of thedieer ene anane ; i 60. OF the direct materials and labor costs used, P1.500,00(is atwributable to cost inefficiencies caused by-a labor ser Agreed betneen evo division is P30000.00. The manufacturing dienes oe pe et rie ce. ‘The simila/plant could have been purchased ata price of 28,000,000, "At what aman! should ihe nye asset be intially fecorded by Candor Company? Pat wii oe the company belhcientiés toe nd” babar CHD methciencces ave An Ase : Coprhenbt PatReSA/ PRACTICAL ACCOUNTING. gulpment L Proper, Plant & Fs C P22,000,000 ‘¢. P26,S00,000 aan Pe ’b. 23,500,000 4. P28,000,000 8. In June 2012, Globe Company acquired a machine in exeha any in exchanged for another machine with acost of P1.200,000,, F and an accumulated depreciation of P600,000 and paid a cash difference of P160,000. The market value of the’! 6/7 45° ve Globe's machine was P6S0,000 : Question I; Ifthe exchange has commercial substance, what would be the cost of the new gsset acquired an du magn ofeatobe mabe eae oe nt Oe Be a. P440,000 & P_50,000 “7. P810.0008P soo00 «FY G10 ace EnO Pears fe balooon ae saooe |. BY ee (Question 2: Ifthe exchange lacks the necessary commercial bance, what woulde te eos of the new acquired andthe amount of gain to be recognized, respectively? on FY (loves k x F100 008 PO € P810.000& P $0000 Fane Pasha 10D b. P760,000 & PS0,000 d. P810,000 & P210.000 —— poe * - Tey can = pre reach 9. During 2012, Webster Company exchanged its old van costing P950,000 with an acurmlated depreciation of 7 oe wee another van. The fair market value of the new van was caiblised st RIOT equalize o¢ the trade, Webster was required.to pay an. ‘ional amount of PO0,000, Ge + aap J tre Gp +40 se) Question 1: Assuming that the cash flows of the asset received differ from the cash flows of the asset given. 7140) bee f wk ‘What is the cost of the newly acquired van and the amount of loss to be recorded in the books of Webster, respectively? Le Roy Plold) Be P700,000 & P10,000 «©. P700,000.& PO 4 90 %. 7790,000 & 140.000 4 P190.000.& PO wv : be Earns Question 2: Assuming thatthe cash flows ofthe asset received does not dtr from Hi ci Howa given. What the cow ofthe newly acued vn and he amount of fw 10 be ered in he books of Duce dus) Webster respectively?) egrmead i a 700,000 & P140,000"* Leda , P700,000 & PO No & pronaoo «P10 00 4. POUND PO pore He ene Rg eS M0 Ho Nog a ees () 10" be March 1,201 Winey crn te 0 tne wend atts afr PP 0 ane LD ,000,000. What amount paid a cash diference of P600,000 for a new machine having a total eash price of P Should the new machine be intaly recorded? ae PPi(n) PREZ eM) a. P 600,000 «. P1,600,000 ne b. 1,400,000 # P2,000,000 ertiere yey bee 11 On December 31,201. ¥y Company purchased a 24,000,000 tract of fad for a factory sif iy razed i fol bung onthe ropeny and sold the mars it sbaged frm the demolion. Trophy incurred aiattont cst and raed avazed proceth dung Devenber 2072 st follows: Payments fo tenants 1 toca the premises, £200.00; Ieralition of ed buns, P1000; Legal fees for purchase enact and | Tecorling ownership, P30,000; Title guarantee insurance, 30,000; Proceeds from sale of salvaged material, | ~ P10,000. In its December 31, 2012 balance sheet, Trophy should report a balance in the Jand account of 2 P3500 "P,380.000 ; 8. px 700008 ol wn (an efheverhic) # P4300.000 de. teen ey FOCFERRED! 12, On Febmary 1, 2072, Weary Company bored P00.000 which bears 12% 1 construction of its qualifying asset. Construction of the building started on September 1, 2012-and continues. ‘without interruption until the year end of December 31, 2012. During the period of construction the entity D incurs directly attributable costs of P100,000 in September and P250,000 in each month from October tos |aferes befert + December (for simplicity i is assumed that these costs are incurred on the first day of the month) Each month flee y _e_ the borrowings, less any amount that is to be expended for the building works:in that month are re-invested and ove wef ogipital: °° Sami ataacel i parannam. Burg the yet ended Decebara), 202 he tyne eaten ot the Pt,000,000 loan totaling P1 10,000 and eams interest on the re-invested portion of the loan of P37,917, What bk. amount of borrowing costs should Weary capitalized? ee ' " F320 hee ee PIR,083 / ae) Mews beet Gnelrucion 5 este expense Amo 8 ON 4 dros, hed ®. ra000 FTES Ta? 13. Coral Company had the following general borrowings during 2011, which we ‘ofthe company's new warehouse: == id to finance the construction = D Copier Principal Borrowing Cat” fee, if Nook ta ioen 2,400,000 340.000 @ hitep a ff tonne tonaty 160.100 Or 1284 long-term note 20.000 2 Gere, on es ‘The construction began on January 1, 2011 AEM warchouse was comp CPOe december 31, 2012, Expenditures on the warehouse were made as follows during 2012: coud - be onwt a vipa AtP® On uly 1, 2011, Wanton Mig Company urchaved the rite w 9 mine, f= Ova tfe equipment cost P3,960,000 and have tha Me HR breny Company owns two pieces of freehold land in Cavite e GEIR, 720,000 & 240,000 ‘e.1490,000 & 240,000 MESA /PRACTICAL ACCOUNTING | ae a 400,000 amber 1 oo ; lave! 1,000,000 four. December M ' Mace ‘piano Put bor 31 ‘400,000. * ‘The amount of borrowing costs should the comy any capitalized during 2 neang fae a P2i2.00 me won nee? : Be P2300 4. Poao.000 wre nent for P924,000 salvage value was estimated ated over 10 years using the double deetining balance method. How much 4 be reported inthe balance sheet ot Devember 31, 2011? 14. On Janay 12007, tans Corporation bough fictory eu 24,000. The asl wil Be dep mt is the toa accumulate depocaton a 450912 eonkgah Cet gy Pere b 545.530 4 oi Ge Bi eho daBonrn > 45, On January 1.2007, Faton Company purhased an equipment for PGi. thi date, the ea A an estimaled economic useful life of 12 yeare a Policy to depreciate this ype of equipment ving a sane yews dud. On January 1 2011, Eaton Company made a review ofthe estimated Ie and salvage vaca WS car sen ad the ee neal tet the set sa revised life of 14 yet ans resi alte of POD The conan as change he Meno depreciation o straight-line, What i the carrying valve ofthe wget on December 31-2012? 5-00.) YSC. foe eere a. 769.600 "6. 865.400) hfe Meer TS Oh be 780.400 1875800 ee bt 16, Listen Company is mining company. whieh acquires a dein itt he ana for ding of core samples for 4 the purpose of analysis a prof Hak ati inn ew ea rea?) has teeny neque the hI 0 explore. The following amano acme dang O11 302 On July 1.201 the company acquired hea at a con of P2,800,000 and capitalized aso tangible LRP ace with an exalted useful he OF 14 yeas. The ea! residual value of PO8,000, It ig the company’s drilling rig is used solely forthe purposes of dling core samples in Area F, as eapecied) Liste Company's Financial year ends every June 30, ‘Question what is the carrying value ofthe Fquipment (Sling fig) a8 oF June 30, 20129 a) none ¥ 72,000,000 (2,080 x fy) “Gap yert.ove b) 200,000 “42,800,000 Gin w Siar uestion 2: What amount should be added w the cost ofthe iangible asset” fore? Pa eC r0000 Legh bypere P= P200.000 Cyn oF Seikag Fg) 4 400,000 17. Whisper Company & mining company has incurted the following costs during the year 2014: Vehicles and drilling rigs, P2.000,000 Cost of replacing major parts of equipment used in ERE activities, P300,000%-Cost of or inspection of equipment used in E&E activities, P1S0.0007Amount paid for the acquisition of rights to. | fore (drilling rights und exploration Ticenses), P120,000; Topographical, geological, geochemical and Geophysieat study costs, P230.000 Deferred costs asociated with consumables, such as materials and fuels used, coniractor paymenis. and employee remuneration, PS00,000; Depreciation on the capitalized tangible = BARE assets, P 245,000, Peon Wetec] aioli i aucai anki dain de oa ee Co) bora 2. 2,000,000 «2.300.000 » P2.150.000 A F250. (24 # Prob Ibo) rion 2: What amount shouldbe recognized as ntngible ERE asset during 2014? eTs0.000 P- PIO9S100 (Ton +2904 + elt ageh) afb. P850.000 ‘4. P1,300,000 The lta purse price was 17920.000, of which P2AO,AF vas allocated hs lan. Estimated reserves were Le00,g00 rene aes cxpets to cat and sll 25.000 tos per month. Watton putchaval new earpeung or eye ao sul ie 8 years. Mowever, aera! he resources ae removed the quent wl be of no wean wll he wl fr PI 20000 I les wal pacts comrade oe ccen, a uno den an deco onthe cna ae 0s pci a 720,000 & 360,000 4. 1,440,000 & 360,000 £5 a Aoi Ey Puck hrs Land A is purchased in 2009 at a costoF © T2geep Pita hic a sachs n2010 an cotoFFSabn Tada ca aN Se ee iit ore . nd ns follows: Year revalued Land a rT oI 8,000,000 nee.ve a None FE P2,000,0000 Sob. ROSA CPRACTICAL ACCOUNTING L nen LODEHY, Plat 200 Bono HAF 11,000,000, Dols P15,000,000 15,000,000 Question 1. What amount of nin (net af any disclose in the profit or loys during 204 4? a None _ © P2,000,000 BO P1000,000 19,000,000 Question 2: Whar amount oF revaluation surplus (1 ‘company should th 1 Of luna) relned to the pices of land should the company Any revera) related to the pieces of land should the ccompuny disclose inthe other comprehensive income during 2015 1,000,000 ‘J. P3,000,000 20. Cream Company had a machinery eorting P3,000,000 wien purchased on January 2, 2000, Fatimated useful ‘oF the asset was for 20-yeary with no salve visu tthe end of is UsefilIfe, Cream uses the stfigh method of depreciation On January 2, 2014, Creat iy evalunting. the machinery for possible impairment, The ‘machinery has w remaining use he of 5 years and is expected to genorate cash inflows of PSOO.000 per year and the co rele P2000 fron ale on the eventual digas tthe end of the fifth year plicit in current market transaction for similar asset is'10% Available information as of Janwary 2, 2014 also showed th the approprinte market price for the same asset is 2,000,000) Fatinutyd cost of disposal, P150,000, What amount of impairment loss, if any, is Wo be recognized? 1 I 230,100 ©. Pan0.000 Sew o. P35 d. P6N0,000, MGS Tem 21. ‘The following information is provided for the impairment of a CGU ay at the reporting date of December 31, 2012: Accounts, Gorcving valug Enic value tess cost to sell Goodwill 1,000,000, Ce None Machinery 2,000,000, py 400,000 Computer equipment 400,000 8 pow 350,000 re i cod. ‘Based on the discounted cashflow method, the reeds Rrount ofthe cash generating uni Sets determined tobe PI, 800,000" a shouk! be alae tothe machinery? None “pts . P500,000 A, poco 22, On December 31, 2012, 4 manufactueing plant with a carrying siren ‘accumulated depreciation uf P10,000,000) was tested for impairm recognized and the basis of the recoverable amount was the estimated fair value less costs to sell of 28,000,000. The plunt had a remaining useful life oF 19 yes, On December 31, 2014, there are indications that the impairment loss recognized in 2012 may be reversed. ‘The value in use is estimated at 235,000,000 Whilst the fair value less costs to sel iy estimated at P50,000,000, What i the amount of impairment reversal should be recognized on December 31, 2014? none rarity 9400.00 b. F.s00000 Teuwo.% teaeien Lis ware Fa 23. On Dee 31, 2012, the identifinble assets and yoodwill attributable Ww a cash-generating unit, after impairment loss, consisted of the following: Hehe Ms y © a 22.40 a tha/y, 32000 Upairmentlom CV after Remain allocation impairme useful fi a P atinn.as 4eac0 i900.) Pinon ANE apy Pies 2hamioo0 18609” s.000.000) 15.00.00 20 years a g00 Equipment 20,001,000 16,200, 5,000,000) 15,000,000 Osean fo, 000. Goo allocated ROOK at. 04000 $000” Toul Pinney eee wrnonomy — ore 4 Less : Au (On December 31,2014 the emh-generaing un was ete 1 reeral ufinpuirment ss. the coverable amount ofthe ceashgenctating init was estimated at PRU0G0.0008 Depreciation sus on the straght tine method Whar saeneat ot impaineneceoveryrevera should be eevee he Props eit ‘nk 1p, * 9% a yaon0.900 WOsini00 3.7550). AG AP SH = em 1 14,500,000 4, Prx.o00,o90 tyanpeeed ley yore 24, On January 1, 2010, Pree Company purcined an ave fr P2,5.000, with aw esinmied economic used tie of 10 years LEE. ‘wih Ho savige vu, Staih-ine mena of depreciation is tobe use. On Janay dacrmined that the recoverable amount of the ase PH,600,004). On limuary 1, 2014 the me hee sonchneceabhe aan ‘FP 860,000. Uf the wnmpnny ure the revalution mel to measure lng ive asset, what ae Une eons Be repo in the petit ots and saeco saul revaluton reserve rexpeetvelyc on Dec 700,000 & P60,000 1560.00 & one 3 a amon 4 vain ne YER ATED gay