ACCTG 2 – QUIZ 3 – JANUARY 29, 2021

CHAPTER 10 - PROPERTY, PLANT AND EQUIPMENT

Question 1: In March 2022, ALL Mines Co. purchased a coal mine for P8,000,000. Removable coal is
estimated at 1,500,000 tons. ALL Mines is required to restore the land at an estimated cost of P960,000,
and the land should have a value of P840,000. The company incurred P2,000,000 of development costs
preparing the mine for production. During 2012, 450,000 tons were removed and 300,000 tons were sold.
The total amount of depletion that Maley should record for 2022 is (Do not round off your depletion rate)
ANSWER: 3,036,000
Question 2: BB Company purchased equipment in January of 2012 for P150,000. The equipment was
being depreciated on the straight-line method over an estimated useful life of 20 years, with no salvage
value. At the beginning of 2022, when the equipment had been in use for 10 years, the company paid
P25,000 to overhaul the equipment. As a result of this improvement, the company estimated that the
useful life of the equipment would be extended an additional 5 years. What should be the depreciation
expense recorded for this equipment in 2022? (Round off your answer to the nearest whole number)
ANSWER: 6,667
Question 3: During 2022, ABC Corporation acquired a mineral mine for P3,000,000 of which P400,000
was ascribed to land value after the mineral has been removed. Geological surveys have indicated that 10
million units of the mineral could be extracted. During 2022, 1,500,000 units were extracted and
1.200,000 units were sold. What is the amount of depletion expensed for 2022?
ANSWER: 312,000
Question 4: Hahn Co. takes a full year's depreciation expense in the year of an asset's acquisition and no
depreciation expense in the year of disposition. Data relating to one of Hahn's depreciable assets at
December 31, 2023 are as follows:

Acquisition Year 2021

Cost 210,000
Residual Value 30,000
Accumulated Depreciation 144,000
Estimated Useful Life 5 years

Using the same depreciation method as used in 2021, 2022, and 2023, how much depreciation expense
should Hahn record in 2024 for this asset? (Do not round off your depreciation rate)
ANSWER: 24,000
Question 5: On January 1, 2021, G Company purchased a new machine for P2,800,000. The new
machine has an estimated useful life of nine years and the salvage value was estimated to be P100,000.
Depreciation was computed on the sum-of-the-years'-digits method. What amount should be shown in G's
balance sheet at December 31, 2022, net of accumulated depreciation, for this machine? (Do not round off
your depreciation
ANSWER: 1,780,000
Question 6: Black Company and Berry Company had an exchange of productive assets. Black exchanged
equipment for Berry's equipment. The following relevant information is available:

Black Co. Berry Co

Cost of Asset Exchanged 1,000,000 600,000
Accumulated Depreciation 540,000 320,000
Fair Value of Asset Exchanged 400,000 350,000
Cash received (paid) 50,000 (50,000)

1. Compute for the cost of the new asset of Berry Co. ANSWER: 400,000
2. Compute for the gain/loss in exchange to be recorded by Black ANSWER: -60,000
Question 7: Uy Company acquired a tract of land on which was located an office building, a warehouse,
and manager's residence for a lump sum of P49,500,000. The following data were taken relative to these
assets

Appraised Value Vendor Original Cost

Land 21,875,000 17,500,000
Office Building 20,000,000 18,000,000
Warehouse 9,375,000 10,000,000
Manager’s residence 5,000,000 4,500,000
56,250,000 50,000,000

Shortly after acquisition, modifications were made on the office building at a cost of P1, 200,000
Compute for the cost of the building (Do not round off your answer including the rate to allocate the
transaction price)
ANSWER: 18,800,000
Question 8: Urban Corporation bought a piece of land and self-constructed a warehouse during 2013.
The following related costs were charge to property, plant, and equipment account:
The modifications to the new building per instruction by the building inspectors resulted from poor
planning by the company.

Land purchase P12,000,000

Demolition of old building 300,000
Legal fees for land acquisition 150,000
Building permit fees 80,000
Interest on loan for construction 270,000
Building construction cost 15,000,000
Landscaping costs 3,500,000
Fixed overhead allocated to building construction 100,000
Compensation for injury to construction worker (No insurance was carried) 140,000
Profit recognized on construction 1,200,000
Modifications to a new building per instructions by city building inspectors 240,000
The following were credited to the account:
Sale of salvage from the demolished old building 70,000
The modifications to the new building per instruction by the building inspectors resulted from poor
planning by the company.
Compute for the cost of:
1. Land ANSWER: 12,150,000
2. Land Improvements ANSWER: 17,120,000
3. Building ANSWER: 3,500,000
Question 9: A sold office furniture for cash of P 42.000. The accumulated depreciation at date of sale
amounted to P38,000, and a gain of P18.000 was recognized on the sale. The original cost of the asset
must have been:
ANSWER: 62,000
Question 10: A Company sold a plant asset that originally had cost P50,000 for P22,000 cash. If Ladd
correctly reports a P5,000 gain on this sale, the accumulated depreciation of sale must have been:
ANSWER: 33,000
Question 11: ABC Co. sold a depreciable asset for cash of P300,000. The original cost of the asset was
P1.200.000. ABC recognized again of P45,000 on the sale. What was the amount of accumulated
depreciation on the asset at the time of its sale
ANSWER: 945,000