Sn ee 1 19 - propery ‘ oe eo wuipment and fi rete ee eovatiot ice ea atures ring ulin Serre. depen . jne the adjusted cost of the followiy, ¥ sr fence around construction ettpaatae questions ove da deer sition, the land and a Based onthe aD onthe date of oer ctively, Day 3) Remalon sto held bang 11000 tase no. : assume SE 7000000 hy 2 pemcedsfromsalvage ofthe ge, Sea) ASE NO." £6,000 Pr ition 300 farsa ¢. P7,730,000 B sonst 00 1 tard an 600 4. P5,833,250 anetggtn above ds, terme ag 4000 . P7,560,000 ge9F yo. 3: Assume thaton the date Histed costo he “ts 1a building 2,357,350 5 Maes of 7,000,000 and 1000000 tn, tenga 2h p400,000 4. P2,418,750 end Pectin, bung have 72,296,750 Oe P88 Te ©. Paoagan POPP : 4. tand provements . P122,000 p #302 4 10265500 ‘ar 60,600 pe allocated ost Fhe ld ling ta ye b. P6400 P < aE tals, the date of acquisition, the old by a MarE65 case No. 2: Assume that on the ullding tay b. 4 Pizisazs ‘minimal fair value. ew building ‘tatable cost of Land, Building a em Q PROBLEM 1953 rial Be Demolished and Lg &91077,800 crys Improvement pone Mian Co. acquired land and bung by py is = . )00. hs, 19,000,000 and assumit anne ee 10. The old building way * 3 P6350 demolished for ‘the construction of amew Be p. -P50,000 @. P113500 - date of acquisiti ¥ ; 41 Unpaid real property taxes up to the » ¢4se NO. 2: Assume that on the date of acquisition theo = 2 contofoptin ofthe acquired properties oa has minimal fair value. panes 3 Excavation cost ‘4 Escrow fees on the properties acquired © pROBLEM 19-4 Acquisition on Cash Bass 5 Cast of locating and reconstructing the property belonging (nn january 1, 2018, Riza Co. acquired land and building on cash bass for ‘ Sethe ae properties 800,000. Appraised values of the land and building are ¥200,00 and >ayment to real estate agent tively. 7 Payments o tenants ofthe properties to induce them to ¥200,000, respectivey- vacate the premises. © additional costs incurred is as follows: 8 a Le Ee ee Commissions paid to brokers CT 410. Bulding permit and licenses Ad Non-refundable sales taxes 100000 iA Architect be labor cost on renovation of the building gygo0, 12 Materials used in constru Demolition cost on some ofthe portion ft HEINE sang ve Pr ition serap " 13 ioral at dg psn) roceeds from sale of demolition Te pent fr clam rinse not covered by insurance eratons: following 46 Rentalfeereene properties acquired lased on the above data, answer the fol ine es ‘onthe portion of the building being 1. How much is the cost of the land? «1507900 a7 Conof ae eee | & P4,065,000 00 17. Castof paving pking lt adjoining bulding b. 368,000 a pe 01 ther overhead cost incurred as result of construction Scanned with CamScannerty chapter 19 - Pr sit much isthe cost ree DUTIES | 997,000 " 7 2 How 97000 d, P639,000 Ohiow See ea 000 omnent : Ore thee Bie json sed depreciation nC hg, opuen 19-5 Acquisition on te an equipment for PS00,009 pea mount Sins) yy fmee Poy 1 2018 Judyel 2 Cosewincurted areas follows, yy cate siren "tao pith a term of3/10,1/30-4 cee Fat pd by Foy Co. 0 Jane Co, “atom im it , 009 "490.009 Jrtand insurance we = ‘on Coetrtestingand alTUS es mecquipment 13,009 sear: Assume the tanscton has acy = Training cost of staff who Cast ow much is the Cost ofthe equipmen, ee subs i on January 10, 2018. 4 Hv 300,000 ed eas pment? $1,000,000 § P2000 How much sthe castoFtbe PMSA” 9575,000 p ithe SK i "Lon 00 ‘a. 527,000 a ps40,000 4 How much isthe gun (103) ones g b. P512,000 7 a oe nan © (Pop gggg RAY Ray cen loquisi p rm (600,00 ition on Account tort ron. 19-0 nex Co, acqued an equipment for P500,000 on ace, case No.2 dssume the anscton cs ome an Gear it : is e : oe arin of 3/10, 0/30. Additional costs incurred are as follows; Som auch “Homa —— rion P 50,000 : 00, 000 ¢ ill operate the equipment 000 rn Serhpaetereel abel pe i 40, b. P1000. 4. P1,400,000 Estimated decommissioning and restoration cost 100,000 4. How much sth a (rls neater is requi Ni &. (P400,00 Imputed rate of interest is 1096. Rex Co. is required by law to dismantle a i 400,000 a irengne) restore the site after 5 years. The account was paid on January 15, 2018. How much is the cost of the equipment? PROBLEM 19-9 Trade-in traded an old equipment fora newer model. Data a. 690,000 «. P612,090 (nJanuary 1, 2018, Raciel b P597,090 > dP637,090 © tefore the trade in are as follows: PROBLEM 19-7 Deferred Settlement Terms (With or Without Cash Equivalent) 4 350000 i 00 On January 1, 2018, Jimar Co. acquired an equipment by issuing two- ppesitated depreciation rey noninterest bearing note amounting to P1,000,000. The pre Average published retail value u ofthe notes 12%, ew equipment: Questions: ' ‘ Listprice manote Cash price without trade in + Assuming the equipment has cash price equivalent of P800,000, how i Cash price with trade in isthe cost of the equipment? 2 ramoon 1,000,000 pens ; 2 Assuming the equipment has ee “cial ‘to much the teen — ofthe equipment? no cash price equivalent, how much is the = Besa0.000 Ce 3 cae a «ran aoe ier 4. P1,690,050 pow uch, tase gai (or os) c0 ead 0000 Uipment en 19-8 Exchange (Wu, o, pn BLS exchanged equipment wig "Hout com, a Scanned with CamScannerplant and Equipmer™ . P110,000 wb. (°360.000) gh Issuance of Equity Instrumen, jon thro 10 Acquisition een propue 19+ entrant on fae 2018, edi hes th at valu of fo »4,000,00 is y : " ee air value of 360 per share erent data, answer the followin: oat ofthe equipment? Base much tential oe i om cd. P4,000,000 , b 400,000 Joss) on exchange tobe recognized ih the, ro 2. How much the gain (OF Jossofasmin Co? . P400,000 . P3,200,000 popteM 19-11 Aoquisiion through Issuance of Bonds Payable O18, Mhelson Co. acquired an equipment with a far yay, Qn faa on se by issuing 500 bonds. Each bond has face value of P20,000 ang value ofP10,200. ased onthe above data, ansver the 1. How much s the initial cost of the equipment? . P5,100,000 a Nil 5,000,000 . P5,080,000 12. How much is the gain (or loss) on exchange to be recognized in the profitr loss of Mhelson Co? a Nil . 80,000 b. 100,000 4. P20,000 PROBLEM 19-12 Acquisition by Donation n January 1,2018, Edson Co. received a land as donation from Marlon Co. The fair value of the land amounted to 4,000,000. Registration and transfer of amounting to 40,000 were incurred by Edson Co. ; Questions: Based on theabove data, answer the following: + Assuming Halon Co. san unrelated corporation with no éondion donaon how muchsthecostothe equipment? i aaa «. 4,000,000 es a 4. P3,960,000 Assuming Marion Co, equipment ©. 1 a shareholder, how much is the cost of a Nil b. PA.040,000 , P4,000,000 . P3,960,000 779 ae 196 Conn Cosy, 4, 2018, Purchased a po eand alte ‘of a new office complex 004 tbe ge proceeds during 2018 as ine 7" jon of existing Bulding on sng ther fees to close escrow, 2js from Sale of demolition strap pas me that the NeW ofce bungee 4. Aich is the cost of the land? B15 t0 be constr 412,000 : a 475,000 © Pérnagg poet 4. 87009 ume that the new office bil Assihis the cost ofthe land? much, 2 eno © 477000 b. 475) ia ppoBLEM 19-14 Subsequent Expenditure on pee pO folowing items relate to the propery, plan an Tempany on January 1, 2018: hlpment of Knaaya ey ea Tand 3,000,000 Motor vehicle ‘Additional information: + On March.2, a-machine which had originally cst P1300000 was rearranged at a cost of 45,000, including installation in ode to improve ‘production. + On June 1, the Kinakiya Company installed a spriner system throughost the building at a cost of P130,000, The installations ensidered paral he blue print ofthe building, Asa result the sane rate was essed by epi 1s overhauled at (On une 30, a motor in one of Kinakaya Companys mus a oa ‘of P60,000. It is expected that this will: extend of the truck for we yeas ve days 2 eave Mo, maintenance repr woe Ek Ne unloading and setting up a new P600.000 Pree oop ‘The wages earmed in this five-day eviod OT edie ie but ot ‘An improvement was made on Decemib, which © the usefulness of the machine cost ?600% Scanned with CamScanneryy Saree useful life of 10 years and a nj ‘to have 3 ee ‘The ee i sf een scosiered tobe sppragtg, ‘het questing 1008 expe jin 2018 : 201 expense it i Imes ote factory buen specifica |General Borrowings ROBLEN 39-18 pea Inc began construction ofan automata On january 1, 2017, ROME finshed and ready for use on Septem, te feeder system. The SYS and = a anesthe preseare asia January 1,2017 zona September 1,2017 ona December 31,2017 300, March 31,2018 ere 200,000 ‘September 30,2018 Kendal borrowed #750000 on a construction loan at 12% interest on an 12017 Tis loan was outstanding throughout the construction period Ty company had P4500,00 in 9% bonds payable outstanding in 2017 and 24, Questions: Based on the above data, answer the following 1. Average accumulated expenditures for 2017 was a 300,000 . P500,000 350,000 a. Paoo, 2 Interest capitalized for 2017 was a. 748,000 c. 760,000 . P42,000 4. P36,000 3, Average accumulated expenditures for 2018 was a. 7536000 P1,200,000 », 1,236,000 4. P1,036,000 4. Interest capitalized for 201 a. Pio4625 iy brats ie 767,500 PROBLEM 19-19 5 On nur 20 oe BerTowing Used For General Purposes fiance contusion ecb farted construction of a new ofice uli Covey. boro construction ofthe wed P15,000, cally Sof the bullig Interest accruing on eae pee Howes top 39-— Property, Pont and Egy porrowing is used of the for wy (otf the year. Investment inggne" tN cp ment ee suis the eapltalizable bor, so ™ 298,750 " a i $7300.00 ‘owing cost? © F295.009 4. 9535,009 EM 19-20 Different Deprecia Babaran Co. purchased mac orator regarding this asset and tion Methods inery on januay Cos gual value geo fespated use 00 saat service hours 6900 tours 000 hours sated units of utPut 00 or required the depreciation table for 2 years under 3 1 ign method 4 ‘Years under the folowing methods Working hours method (Darwin Babaran Co. us hours for the product it manufactured for a oreo ie respectively) and 2019 4 Units of output method (Darwin Babaran Co. manufac units ofthe product for the years 2018 and 2019 respective Sum of the years’ ‘Sum of the years’ years Sum of the years’ digits and assume thatthe date of acuistion s Ap ° jing balance method ing balance method and assume thatthe date of aoq April 1, 2018, 150% declining balance method PROBLEM 19-21 Straight-Line Hayaan Mo Sila Construction pur 102,750. At the time of purchase, chased a crane on January 1, 2016, for 2 aeesumtel ove 018 determined tha alu of P4500: If ‘what wil be the Hayaan Mo Sila uses the straight-line etd of depred depreciatiox mne in 201 3 ation expense for the cra i sick a P16,000 bo P13,250 a. 78000 ae Scanned with CamScanneran oN a ner nto COPA a, 6999 ods ash Price of Paget Saag ee sono (5a cauieg ee ae . sates 240.000 1p0F ale machine ony, 258 a on yes Wt Ce cee 80,000 Fs of Pps 760.000 308 sarap val 320,000 sot guced OY ‘the machine in 2017 ana ce nstatation costs of P0000 WEE incr aenin's US Ie often years and an estimated salva ey ase a uae Lng record 25 deprecation eoneraee hy basi shoul ethod? efor spesraise EEO «993,000 ea § 4. P31,800 mizhz00 b 930000 p. F904 4.974520 ite Method gah nate ypLeM 19-23 Compe ng Corp. decided to use the ] ypLEM 19-26 ing Hours Method ROE “ara Aral Lang COTP- the compost, et Mio. Sila Maglalowatsa Manufacturing Company purchased chased anew ence f is bsness AT rared the following schedule of macy ‘deprecation 2 ly 1, 2017. It was expecte ae thod of dP on July ‘pected to be used for 100,000 working hours timated useful life of eight years. Total cost of the machi ie was space owned. Estimated Estimated .d salvage value was 000, and salva 3s estimated tobe P6 raateon sage vale Liein years re chine in 2017 and 2018 See 275,000 asi Lona ae 40,000 15 iT 10,000 working hours Yaseen a 5 218 15,000 working hours | i ‘Mo Sila Maglakwatsa Manufactur “ara Aral Lang computes depreci the straight-line method. Based onthe teppsis and “ses the working hours wot er aepeeaton ata semation presented, the composite life of tess asso (in years) shouldbe Teareciation expense for this machine in 2018 woud be a 1330 5 Anat a, P54,000 ©. PB1000 b. 16.00 - b. 260,000 d, 290,000 PROBLEM 19-27 Double Declining Balance Titer Soaps purchased a machine on January 1, 2017 for P8100 cash, The machine has an estimated useft life of four years ‘and a salvage value of P4 100. Luther uses the double-declining-balance method of depressitr for al is anoks. What wil be the machine's bok valueas of December 3), 20182 PROBLEM 19-24 ‘an asset acquired january 1, 2018, for P15,000 with an estimated 10-year ie dani no residual value i being depreciated in an equipment group asset aco ara hacen erage serie feof eight years, The asset is sold on DecerbeS 2018 for 6,000. The entry to record the sale would be: a a 6,000 5, P4500 Loss onsale of equipment 9,000 a. 95,100 c. Pa i , b. 24,300 . meet 15,000 4,700 a Equipment 6,000 PROBLEM 19-2: ining Balance ‘i .>= sone Dewey company ee mine hat was instalied and paced ee Accumulated depreciation 6,000 snfanuary 2, 2017 at a total cost of P480,000, esl aves 4os onsale of equipment aay ‘ooo, “The machine is being deprecated o¥et tin er ih et | , 45,000 feather uene For the year 2018 pense o 785 Scanned with CamScanner. P80,000 , P96,000 ne b #76 potence elning of 29 150% Decliing cyine on January 2, 2017, @ BLM 77 any purchase al ie of five years and a Wad replaced with new oe2228, rere Co estat red bythe 150% dec 00 depreciation of; Pm: ‘The mac predation Was CO Tanceat December 31, 2018, shoyigt® Mey 1710000. DP epreiton c. 490,000 be hay © 95,409 ‘Toe seo ,000 4. P510,000 ant bp P459,000 gM 19-34 Change in Estimate years’ Digits R08 LE st cost P8,000 was original @ pn 19-3050 ine on Jamtary 1 2017, In prey poe ene method with no sala, eee ove Joe operation bOUBHT ©9990 cash and signed an interest-pes 8 ty rai yck would last an additional four ne te one year 2 he company P life of the mac! eatin the ou nal four yea ‘Yeats twas decides chin, the comPrY Tgusel life ofthe machine is five years syn sy te ga’s depreciation would be (orator of gees teed for P109000. The ete expected to be P1S,000. Given this informa," | 5% 559,000 cL YORE the time the baht ‘expense would be recorded for the year ending p< wy % $1,000 4 eran och depen unr theyeat gts depreciation methogy "hy 6 ee a. 206i ew . P36,000 gues 19-95 Change In Estimate nt . P34,000 mare uary 2, 2014, Jigo Ocon Co. purchas poe O10, The machine has an Bear ust ews Mahe 000. year 19-31 Component Depreciation 1330 iy and is being depreciated by stra bas a salvage value PROBLEM pon 5,000: by stragh a een uring has equipment that is comprised of five component, 20 method. ‘Tracy Mant Estimated Estimated ase No. 2 Assume that on January 1, 2018, fgo Co, dete Component Cost residual value Life (In years) (aroining useful ie is only 2 years. arte ‘A 550.000 50,000 10 se No. 2: Assume that on January 1, 2018, j 4 + 2018, ligo Co determines ha eer a 3 rage value atthe end of useful lifes only P150, enon tate D 190,000 30,000 7 (ase No. 3: Assume that on January 1, 2018, igo Co. changes its method of E 235,000 40,000 6 depreciation from straight-line method to sumn-of-the-years’ digits method, ‘Compute forthe depreciation expense for the year Required: a 7196250 c P175,551 Foreach of the independent cases below, compute for the following: b 7193551 4. P161,500 1, How much is the depreciation expense in 2018? omnes, 1. How much is the remaining book value atthe end of 20187 Retirement Method ‘Anita Mining uses the retirement method to determine depreciation on tsofie | PROBLEM 19-36 Fixed Asset Turnover equipment. During 2016, its first year of en parched at cox of P4000, Ve ie ofthe equipment verge years and no salvage value Was sold for P6,000 and ‘would record 20 a 935,000 b. 44,000 1000. Useful life of the equipment averages fa {s anticipated. In 2018, equipment costing S000" replaced with new equipment costing #60,000.Asl# J 2018 were: The statement of financial position of Davidson Corporation reported net xed "mses of P320,000 at the end of 2017, The ie-asettumove rat or 20% ‘3540, and sales for the year totaled P1,480,00. Net fied ases atthe 118 depreciation of; & 470,000 420,000 . P54,000 b. P370,000 400,000 4. Nil PROBLEM 19.3: 37 Derecognition of PPE J total Joss of June 30, 2018, a fire in Jeremy Company's plant ee 000 analy Poduction machine. The machine was being deprecated 2¢°°° 786 78 7 Scanned with CamScannerit and Equipment chapter 19 =P of 160,000 at December 31, 2 Sad 3 a en vas 220,000 ang 70% m ir value of . the fire, the fat 159000 in October 2038. In its incgye nce pro 8, what amount should joc sta insur ended Decembet 3 201 Jeremy fo fin orloss on disposition ¢. P40,000 gain "i ee 4. P50,000 gain bh P20,00010 ‘COMPREHENSIVE PROBLEMS PROBLEM 19-38. equipment section of Brenner Corpora ee pln pecmber 31,2017 included the foloyiat O° tg. of financial pos! "ms Land P 700,000 Land improvements 10,000 Building 900,000. ‘Machinery 980,000 arn 2018 flowing ata were avallsbe £008 Upon your any, fixed assets account: srg, the purchase of land : em ‘on the land bought, including interest at 1696 om Realtor's commission ‘ realty taxes and documentation expenses Cost of tearing down an old building on land “Amount recovered from the salvage of the building demolished Cost of fencing the property ‘Amount paid toa contractor for the building erected Building permit fees Excavation expenses Interest that would have been earned had the money used ‘during the period of construction been invested in the money market Invoice cost of machinery acquired Freight, unloading, and delivery charges Customs duties and other charges ‘Allowances, ‘hotel accommodations, etc, paid to foreign technicians during installation and test runs of machines 400000 Royalty payments on machines purchased (based on units ‘roduced and sold) 209m Questions: Based on the above and the result of your : audit, determine the following: 1 Thetotalcostoftheland, a 7,770,000 ©. P7,620,000 19 = PROPER, Plan ang 97,650,000 b, otal cost ofthe la 1 p320,000 id im de, Provemene 8009 * 910,000 r ‘ b «P09 jal cost of the build 4 p47 9000 . ™°97,990,000 ne 09 ‘ % 73020,000 Msi pach total cost of the machine sent +. *53.500,000 y 00 p 73580,000 SPe2000 snetotal cost ofthe deprecation, 3.220009 5 96,690,000 EY ana 6,010,000 © P6725 ane Mme fe 4 6470009 LEM 19-39 Specific and Genera) i anuaty 2, 2018, Remme Bain cor Mas soln, The bulge ee dng OM ak rs comple ss na faving parents Weremaietothesuyqueel °C | GeaPH eof Payment ~ Amount pry 3, 2018 3,000,000 May 12018 41260,000 Seember 12018 1500009 ay 1.2019 2.200000 agus 1, 2019 2,400,000 ‘he following amounts represent the borrow aeeer 31,2018, ings of erm Balin Co, of 10% #2,000,000, 4-year note dated January 1, 2018 wi 88 St tay 12h Interest income in’ 2018 earned on the temporary investment of the proceeds is P20,000. +» 18%, P4,000,000, 5-year note dated January 1, 2018 with interest payable annually. + 12%, P6,000,000, 5-year note dated December 31, 2017 with interest jes are outstanding in 2018 and 2019 Questions: 3 Based on the above data, determine the following: | The amount of avoidable interest for 2018 3 P308,880. . PL031120 ». P4ge.8e0. 4. P1520,000. 799 Scanned with CamScannerxr interest-bearing de "years of 2017 and 3 Borrowing cost bts 18), Megs ‘Beeslee above dats, compute 0 the following: land ' Tonle c. P1,320,000 i 91.264,000 4. 1,428,000 se borrowing cost for the year ended 2017. 2 res " «. P187,500 b 725,000 d. P960,000 x Capitaizable borrowing cost for the year ended 2018. a, P337,626 c. 560,000 b, P340,750 d. P369,126 4, Total cost of the bt ing as of September 30, 2018. a 76,771,750 c. P6,832,001 ‘b. P6,755,501 d. 76,724,001 5, Interest expense for the year 2018. a P590,874 ©. P622,374 ‘b. P340,750 d. P619,250 6 Peseta expense for the building in 2018, er c. P84,648 hy pe4s0n) d. P252,150 D PROBLEM 19-43 Pepito Co. is a reraton. The folowing information relates to the company's property: : ae “a le company has a 30th September year end. eared Soa pared and brought into use’ on' October 1, 1000. The cost of testing the plant amounted to 45,000 7907 iversifed industrial company with many different ares plat manufactured White iy fof the plant is esyn ge of a better quality, nee a or inspection order to maintain the operating license Inorda to be performed every three ye years an tects peta ae require Years on th chase date. The cost of the inspection at|Qetober aon F40,000- October 2018 amounted to __ aphotocopying machine was purchased forthe ofe Ajo and delivered to the premises of Peete iam tnachine needed to be installed by a technician and el Y January 31, 2019. The machine was avallable for use isda Tone management decided not to use the machine until March 1, 2019, an tasting photocopy machine was on lease until that date Use ofthe machine began on March 1 as planned and the machine was wed continuously throughout the financial year except for the month of August 2019 wena rnew high tech machine was given to Pepito ona trial basis. The use ie of the machine is estimated at 3 years and the residual value at P4000 ‘Questions: Based on the above and the result of your audit, you are to provide the answers tothe following: 1, Whats the depreciation expense ofthe plant forthe yea ended September 30,2017? a P150,000 c. P161,000 b. P160,000 a. P174333 a i Septemt 2. Whatis the depreciation expense of the plant forthe year ended Se 30,2019? a 150,000 , P61,000 793 Scanned with CamScannerpense of the motor vehic, l fog he . 925,500 @. P70,500 % i 945.000 eon 88 ofthe helper for hg 5 is the 4eprect ae 4 wer 30 20197 «. P80,000 na 990,000 a. P244,000 174,000 1 Fe acy tn ner ming ra 5 Wa september 30,20! ga ~ a eS d. 780,000 bs PROBLEM 19-44 RoR 2°95 provry. ant and equipment dso ey, ata at December 31,2! . 017. ‘Accumulated Depreciation 12/31/2017 140000 —«P (92,800 Machinery-R 204,000 140,800 Machinery-1 320,000 60,000 Machinery:A 320,000 64,000 [Methods of depreciation and other data: Date Useful Salvage Deprediaty Machinery: Purchased __l Value Method D 7012 _ioyears ® 12400 sip R 2013. 15,000hours 12000 Astviy I zie AS years 20,000 straightite A 216 —-0years 20000 DDB You noted thatthe client's policy on depreciation is that no depreciation recorded in the year an asset is purchased, and full year deprecation & provided in the year an asset is disposed of. No depreciation has yet bea recorded in 2018. The following transactions occurred during 2018: 1. On May 5, Asset D was sold for P52,000 cash. The company’s booker — this retirement in the following manner in the cash recep Cash AssetD 52,000 52,000 On Decem poe ber 31, it was determined that Asset R had been used 2.100 owt 794 "Up, ecember 31, before co eat eset of Lls decide (dy ap years Uefa ong acembet 31, IEW dscoygsy Rg 4. Oyppen expensed competing Sata Fatwa othe 12d Bre of 10 years and ng near al Bet gg awe double declning alan Se Ye an, it estos et ad str I a ions we uh eee oF isthe Men OF oss og sate 5 Hp 16,400 SlotMachin ‘ (16,400) qe "Din 201g) How much 16 the ACCUMUeted dp, ay a toe? — a “Seton Machinery 7169,360 » Peceee 3 fea ia oe wy much #5 the accumulated dey — 3 Ho Preiation Mack sen EY, Dee B 5.000 aber 2, a B ©. P4000 pe. 786,00 4.P124000 iow much is the accumulated deprec + tee ation Machinery A, December 3 3. 115,200 Drea pb. 128,000 4.76000 : Hon ach he teal depen eens en a P122 560 b. P113,680 4 Pi31200 PROBLEM 19-45 Component Depreci Manaloto Waters Co. is a company involved in botlng spring water. The Nariny purchased a botling plant on janiry 2,201, mae a thre significant components the cost of which sas flow Description of the component Cost gine [500000 ‘Conveyor belt and fittings 2,000,000 Outer structure. ‘800,000 Description of cost Delivery and installation. Staff training [60,000 | Testing to ensure that the plant is fully operational before start of production Scanned with CamScannerNN for use in production on Fy formation caer fe rable Seren 2018. gee plant OS only et about pn er juring December 2018 who, to a i as al OY POT the de dm ee co ne meted when depeci, Mey + ee aot apPore or pareofamonth). Bitsy Pa er costs ae for fered 20 be incurred evenly amo, tty : waar cose nts rte bowing Pla (Le. where appron’ the SE ee ee ate ote act ce PY Manaloto Waters Co sland yy + Tee en Deemer 5. 2016 for P4,000,000. The", depreiated ws sete above andthe result 1 ase tothe lowing. goa cast ofthe engine in 20187 How much * fh p.500000 , P1,761,000 b. 1,750,000 4, 1,791,000 2 Howmac the ttl orofthe conveyor belt ana Stings in 20167 a. 72,000,000 c. 72,261,000 d 2,250,000 4, 2,281,000 4. Howmuch sthe total costof the outer structure in 20182 a 7800,000 . P1,061,000 b. 71,050,000 4. P1,081,000 44 How much isthe total deprecation expense of the plant In 2018? a P79973. c. P490,256 b. P871825 d. P534,825 5. How much s the total depreciation expense of the plant in 20197 a £799,173 . P490,256 b, P971,825 4. 534,825 PROBLEM 19-46 “The Bullding and Accumulated Depreciation accounts of Michael Co, contain folowing entries du Building Item credit ing recelved asa government grant paid for the exchange of office building No, 2 for office building No. 3 (exchanged with commercial substance) 400,000 Accumuta ede = pers 2015 elt en “2 ween eas ete 3 Depress et gona nforman : alge beginning balance ofthe bu questions as wa nuary 1 2018, maar on ing © 245.000 venance EXPENSE. ing which had a fair value of, Abul L400, iayent as 2 donation on Janay 9 so masa soxgrtea to be usetl for mothe Oe Tae nadtmey estrein onthe grant. Le er ced tt 45567 950,000 and was charged to 210 pomamn tt dan wspo,000 was incurred to remodel and Ten ea ete Ante sae aden dehy, ‘the o ENO is tens OU Te esi, \s: gues the above andthe eutof your aut youare peer oloWiNg peta oprediituens nf conrectcost ofthe factor bulling acquired on a 4, Theor. 000 gaequlred on nua) 22018 i. 21,450,000 2, Thegain or loss on exchange on june 30,2018 a, P150,000. ‘c 350,00. b. P100,000. 4 P400,000. 4. Thetotal depreciation expense in 2018 a. 2635,000 490,00. b. P640,000 7485000. 4 ‘The income from government grant in 2018 a, P140,000 ¢, P135,000 b. P145,000 4, 125,000 “" or 31, 2018. 5. The Carrying value of the office building No. 128 of December 31,204 a. 7810,000. ron ‘b. P945,000. a. ro 737 Scanned with CamScannerus - COMPUTATIONAL ESTO! CHAPTER 21: REVIEW Q! ytion Issues 24-4: Classified during the financial statement FR ing WAS an the bok and S09 Ms. Eling ig ‘ t Ig eas Compa 20 Cems inthe statement of Prana] pos a how to. dassify activities. ety cot Ame tem decline in activity is no longer |p sn une) [retary which due to 3 ¢ i P00, 1) | Fattre and is now bei held for sale in accordance ee wehased for its investment Fy | Farming land was Foon has not been obtained —, yotential. Planning P ein a constructions of: I | 226i] | 100054 | 1.200;005) ential a Teper? That Iv in the process of construction for | 950009 ale Fy [A property intended forsale inthe ordinary course of | 450,059 business @)_| Owner-occupied properties : 1,600,000 3) | Buildings occupied by employees, including Ms. Erlinda |~ 760,009 = the accountant. The employees pays rent on the building they occupied To) [A building occupied by employees, the employees do | 240,000 not pay market rent on the building they occupied. Ti) | A building that is leased to a third party under a| 1,110,000 12) that is held under mixed use; half of it is | 1,720,000 13) | A property wherein significant ancillary services are | 960,000 provided to occupants 74) | Land and building leased toa subsidiary 2,100,000 15) t building leased to an associate under an operating | 1,620,000 16) | A new machine leased to another associate under an | 530,004 operating 17) [A machine is leased by the company under | 420,000 ua 0 & p4t40,000 | Mssany nd wperty, Plant and equipment 28009 1 F#40,380,000 79,120,000 © 07¢099) * P0Soo09) invent * © P40 5, £950,000 pa westment Property is initial 4 i Such costincludes NT at os yy 2 start-up costs — Pap Abnormal waste Peper tastes Til operatngoes 1 captalaprectin nde an cpr ny eld for aureus as omer ed pape 4 Mopeny underconstuctontoteundas tne ey, PROBLEM 21-2: Classification issues 4) SMB constructs a 3-storey building of which it curt es ot foe and occupies the other 2 floors. The oors couldnt beset, 2) SME bought several properties in Britain, which trent eu. Hi of the building finding tenants is difficult. The building has been vacant for owe 3 ye now. 3) SME bought three properties in Singapore that intend to ret ost nth future. At the date of acqui wasn ave make tere locations. According to management iis therefore not pes the fair value of the properties reliably. {uestions: retin ts a SME has the following questions to you is audios : ‘etements for the year ending December 31200 1. How should the three-storey building be a8 ted for? 4 Property and equipment 4. Investment property QA7 vw Scanned with CamScanneret ‘Chapter 24 ~ Revaluation, Impairment and None rent ASSet Meld for Sale 3. How much isthe revaluation surplus at the end of 20187 a. P1,200,000 1,536,000 b. P1,520,000 <4. 1,600,000 4. How much s the gain (or loss) on sale of machinery in 20207 } a. (304,000) ‘e P1,200,000 b. (P4,000,000) «4. P4,000,000 5. How much is the total revaluation surplus to be closed to retained earnings in 20207 a Nil ¢ 1,600,000 i b. 1,472,000 1,875,000 PROBLEM 24-3 Revaluation, With Change in Useful Life and Residual Value On January 1, 2018, Janine Co. revalued its machinery with a cost of 4,550,009, acquired 5 years ago with an estimated useful life of 20 years and estimated idual value of £50,000. The machinery has been estimated to have a lacement cost of P9,100,000. On the same date, based on objective evidence, Janine Co, revised the estimated remaining useful life and residual value of the ‘machinery to 25 years and P100,000, respectively. On January 2, 2020, the machinery was sold at net proceeds of P7,000,000, Questions: Based on the above data, answer the following: 1. How much is the revaluation surplus on January 1, 20187 a. 1,125,000 3,425,000 b. 72,250,000 d. 4,550,000 2. How much is the depreciation expense in 2018? a. P171,250 , P342,500 b. 270,000 . 7456,667 3. How much is the revaluation surplus at the end of 20187 a P2,740,000 . P3,425,000 b. 3,288,000 . P4,378,750 How much is the gain (or loss) on sale of machinery in 2020? a. (P150,000) . ¥690,000 b. (P2,100,000) 4. P5,155,000 5, How much is the total revaluation surplus to be closed to retained earnings in 20207 a Nil ©. P3,425,000 b. P3,151,000 d. 4,246,667 = 966 i nay ———SSTent Asset Held for Sale impairment and Reval Co. acquired machis p 1, 2021, based on objective evidence, the asset was found to have we btescd The machinery now has a recoverate amanse Goren Sing an estimated Fesidal vale of a0 00, ee 8008 spove data answer the following eecfonthe toa the company suing cost model, Beno 3 Ashe depreciation in 2018 on © P2000 = T200000 ‘ 4. 299,000 cits the revaluation surplus on January 1,20197 2 Hote «. P300,000 $200,000 4. 990,000 such isthe depreciation in 20192 3. Ho 700,000 ‘c. P310,000 i 7220,000 4. #190,000 uch the impairment loss in 2021? c. P8050 4. P1,450,500 ow much is the depreciation in 2021? a Nl c. Pisa214 h. #128500 4. 200,000 case No, 2: Assuming the company is using revaluation model, answer the stove questions: answer the following: PROBLEM 24-5 Impairment and Revaluation of PPE Onjanuary 1, 2018, Jude Co. acquired machinery with a cost of P2,300,000 with anestimated useful life of 10 years and estimated salvage value of ®200,000.0n January 1, 2019, based on objective, the machinery was found to have been impaired. The machinery has a recoverable amount (fair value) of 1,847,000 withan estimated useful residual value of P200,000. OnJanuary 1, 2021, the machinery now has a recoverable amount (fair value) of 11654,000 with nil residual value, Questions: 4used on the above data, answer the following: (Case No, 1: Assuming the company is using cost model, answer the following: |. How much is the depreciation in 2018? a Ni c, P210,000 967 Scanned with CamScanner= ‘Chapter. 24 - Revaluation, Impairment and Noncurrent ASSEt Held for sa. b. 195,000 ‘4. $230,000 2. How much isthe impairment oss in 2039? a Nil : ‘¢ P240,000 b. P210,000 243,000 3. How much is the depreciation in 20197 a P185,000 P210,000 b. P200,000 4. 183,000 4. How much is the revaluation surplus on January 1, 2021? a Nil © P24,000 b. P49,400 <. P380,600 5S. How much is the depreciation in 2021? a. 242,000 ¢ 210,000 b. 7238571 . P214,200 Case No. 2: Assuming the company is using revaluation model, answer th, above questions: e PROBLEM 24-6 Impairment of Intangible Assets ‘The Syria Company acquired several small companies at the end of 2017 ang based on the acquisitions, reported the following intangibles in its December 31, 2017 statement of financial position: Patent 200,000 Copyright 400,000 ‘Tradename 350,000 Computer software 100,000 Goodwil 900,000 The company’s accountant determines the patent that has an expected life of 10 years and no expected residual value, and that it will generate approximatel equal benefits each year. The company expects to use the copyright and tradename for the foreseeable future. The accountant knows that the computer software will be used in 120 offices: 60 offices in 2018, and expects to replace the software in 40 more offices in 2019 and the remainder in 2020. On December 31, 2018, there are no indications of impairment of patent and computer software. The following information relates to the other intangibles: a) Because of the rampant piracy, the copyright is expected to generate cash flows of just P8,000 per year. b) The tradename is expected to generate cash flows of P15,000 per year. ©) The goodwill is associated with Syria’s General Manufacturing reportit unit. The cash flows expected to be generated by the General Manufacturing reporting unit is P200,000 per year for the next 25 years. The reporting unit has a carrying amount of P3,000,000. 968 data, determine the fol ae, wing (Assam Sst "(Assume that the appropriate rate Fain of intangible assets tn 2018 anon «. P107,500 ‘roam 4. v20,000 Fr pairmencoss in 2018 ert « Pa73,220 pd 433,720 gamountof goodwill on December 31,2018 cag «©. P855.000 rane 4. P659:720 » agamount or other intangible assets on December 31,2018 conga ©. P640,000 acd 4. P706,667 24-7 Amortization and Impairment of Intangible Assets Hie, Albay Enterprises prepared financial statements internally. The Mas not been audited because the ownership is held completely by one iiig not actively sold. As of 2018, however, in anticipation of bank iy and sible public offering of common stock, the company needs audited sand Pocmments prepared in conformity with generally accepted accounting fects. The corporation's partial unadjusted tral balance. appeats as ‘tows: ratent 1,430,000 raemark, 4,004,000 Franehlse 1,790,000 ‘patents were purchased from another company when Albay began ntions on January 2, 2009. These patents are being amortized over an fopeced useful life of 15 years. Improvements made to equipment covered by the patent costing 150,000 was debited to the account in January 2016. Anorization in 2016-2017 included amortization on the P150,000 for the renaining life of the relevant patent. It is determined that the 150,000 should tave been expensed in 2016. It also determined that on January 1, 2017, the ompany acquired a competitive patent amounting to P135,000 which was ‘edited to expense. ‘The competitive patent did not extend the useful life of the ovginal patent, on January 1, 2018, it is further determined that one of the ‘tents acquired on January 2, 2009 has a remaining life of only 4 years. This Patent was originally assigned a cost of P300,000. The cost of trademark includes the purchase price from Group Company for 800,000 on July 1, 2015. Expenditures for successful litigation in defense of the Rademark te id on July 1, 2018 and were also debited to Seopa! js expected to have an unlimited ‘beaccount. Through renewals, the trademark ana Scanned with CamScannerlife. in 2018, because of a decline in the economy, the trademark i expected to generate cash flows of just P75,000 per year. The usefy)/2°W trademark still extends beyond the foreseeable horizon. (Assume apn of discount rate for the trademark is 10%) Prepriate On January 1, 2018, Albay signed an agreement to operate as a franc Teofla Service, Infor an inal franchise fee of P1.700,000, OF wa MEE of Fedamae 2 nial ance fx 1700000. amt yyable in four annual payments of P300,000 each, beginni Ke Wag ‘The agreement provides that the down payment is not refun services are required of the franchisor. The present value of janu: the four annual payments discounted at 14% (the im ~e fore fos 2018 of type) is 874,000. The agreement calls for an annual payment of sag ths Revenue from the franchise. The revenue from the franchise for 2g 08 1,800,000. Albay estimates the useful life of the franchise to be ten yen® 88 total amount of initial franchise fee and the 5% of the periodic france? payment were debited tothe cost of franchise account. whlse Questions: Based on the above data, compute forthe following: 1. Amortization of the patent in 2018 a. 198,750 © P240,000 b. P216,250 4. P178,750 2, Adjusted carrying value ofthe patent as of December 31, 2018, a. P1,231,250 1,190,000 b. P1,213,250 4. P1,251,250 Impairment loss of the trademark in 2018 a Nil , P339,157 b. P50,000 d. P289,157 4, Adjusted carrying value of the trademark as of December 31, 2018, a. PB00,000 . P460,843 b. 750,000 d. P510,843 5. Amortization of the franchise in 2018 a Nil . 9274,800 b. P67,400 . P137,400 PROBLEM 24-8 Impairment of Cash Generating Unit On December 31, 2018, the following data are available on one of the cash- generating units of Allan Corp: Carrying amount before impairment: Inventory 10,000,000 Investments at fair value through other comprehensive Income 20,000,000 Property, plant and equipment 30,000,000 Patent 10,000,000 __ 2,000,000. Goodwill 970 Jmpatrment and Noncurrent Asset Held for S t ale 72,000,000 2016, Allan Corp. has undertook impairment testing of the Oo ee Bt - eas at ‘and determined the value in wee abng unit value in use ofthe unit at PoO.Goo ove 705, pov data answer the following fon ys the impalrmentosstobe alloted good? rae «. £476,190 1M sot 4. 2,000,000 b yairment loss to be all sch is the imp: located to inventory? A jw © 71612903 + Niass7t 4. P10,000,000 Book loss to be all uch is the impairment | e allocated to investments at FVT 3 wont c. P3,225,806 i 3 9957188 4. P20,000,000 rach s the impairment oss tobe allocated to PPE (a cost modely? 4, Ho 785,714 ©. 7,142,857 a 2 74536,710 4. 97,500,000 bP sow much the impairment loss to be allocated to Patent? Ho St ©. P2,380,952 Fher2003 4. P2,500,000 qost8n 24-9 Impairment and Reversal of Impairment of Cash Generating Git by December 31, 2017, the following data are available on one of the cash- fueatng units of Paradise Company: 100,000 at laestory ‘aunts receivable fiatand equipment ‘culated depreciation (annual depreciation of P1,200,000) Telemark (annual amortization of P120,000) Faent (annual amortization of P80,000) 850,000 Gon 400,000 ‘he accounts receivable are regarded as collectible and the inventory's fair equal to the carrying amount. The patent has a fir value ‘esscost to sell of P757,500. December 31, 2017, Paradise Company has undertook impairment testing of te cash generating unit and determined the value in use of the unit at 16300,000, — 2018, Paradise Corporation decreased the depreciation charge on “perty and equipment to P1,000,000 per annum, to P112,000 per annum for Scanned with CamScanner‘Chapter 24 ~ Revaluation, Impairment and Noncurrent ASSEt Held fr ale the ‘amortization of the trademark and to P60,000 per annum, fo,” amortization of the patent The inventory on hand at 31 December zor the sold by the end of 2018. At 31 December 2018, Paradise Corporation aac." '¢ Tecoverable amount of the cash-generating to be P2,400,000 greates sd the carrying amountof the unit ti! Questions: Based on thesove dat, answer flowing 1 How much tthe earring emount ef he slant and equpment on 31,2017 after allocanng impairmentloss? December «.#13,600000 a. 11,360,000 4. P10,983,158 b. P11,320,000 2. How much is the carrying amount of the trademark on December after allocating impairment loss? ert am a. 2,130,000 P2,550,000 b. 2,122,500 4. 72,059,342 3. How much is the carrying amount of the patent on December 31, allocating impairment loss? } 2017 she a. P710,000 850,000 b. 757,500 @. 757,500 4. How much is the carrying amount of the plant and equipment on December 31, 2018 after the reversal of impairment loss? a. P12,400,000 ¢ P12,267,998 b. 10,320,000 4. 12,357,384 5. How much ts the carrying amount of the trademark on December 31,2018 after the reversal of impairment loss? a. P2,430,000 b. 92,010,500 6. How much isthe carrying amount of the patent on December 31, 2018 after the reversal of impairment loss? a. 770,000 P025,992 b. 697,500 4. P835,201 2,390,002 . P2,407,415 PROBLEM 24-10 Noncurrent Assets Held for Sale -Single Asset On January 1, 2018, Onin Co. sd to sell a machinery with a cost of 1,200,000 and accumulated depreciation of P480,000. Depreciation of P10,000 per month has been provided by the company since it was acquired, The ‘machinery will continue to be operated until sold. The company undertook all the necessary actions to be able to classify the asset as held for sale. On the same date, the fair value of asset amounted to P620,000 while the costs to sell total P20,000. On February 28, 2018, the plant had not been sold but there has been objective evidence that the fair value went up to P810,000. © 972 Pg yoy data anwer the fllowing: is the impairment loss to be recognized on january 1, 20187 ‘ ree c. P120,000 +p No000 4. P500,000 i depreciation expense in 2018? the dept we uch is . P60,000 by 79000 4. 120,000 : .e gain to be recognized in profit or loss in 2018 as a resul pov ie ale ofthe asset? ‘aes 5 crease . P120,000 = S000 . 4. P190,000 ps0 / {s the net gain (or loss) on sale ofthe asset in 20187 ' ow eh 6 ©. ?120,000 = Nooo 4. P190,000 ame instead that on the date of reclassification, the fir value less costs 5 s ‘amounted to 800,000, how much is the impairment loss to be feovgnized in 20187 nl . P320,000 } p90,000 i 4. 400,000 onlsM 24-11 Noncurrent Assets Held for Sale -Single Asset and nalation Model fant Company accounts for noncurrent assets using the revaluation model. {nAptl 30, 2020, the entity classified a land as held for sale. During that date, tecarying amount was P2,200,000 and the balance of the revaluation surplus 1as?100,000. SEN. shine 30, 2020, the fair value was estimated at P2,350,000 and the costs to sal at £120,000, On December 31, 2020, the fair value was estimated at 12100000 and the costs to sell at P90,000. UsENO.2 ‘April 30, 2020, the fair value was estimated at P1,950,000 and the costs to Hit 780.000. On December 31, 2020, the fair value was estimated at *400000 and the costs to sell at P90,000. fetons: (Use the following questions to answer both cases) 1 nthe above data, answer the following: om much is the total impairment loss during the year? & ¥120.000 ¢. 230,000 P150,000 , P340,000 973 Scanned with CamScanner* How much is the revaluation surplus? a Nil £250,000 b. 150,000 . P100,000 3. How much isthe adjusted balance ofthe land on December 317 2. 72.010,000 ‘& P2,200,000 - P1,870,000 . 2,100,000 ‘4 How much is the gain on reversal to be recognized on December 337 a ¢ P230,000 be Pa! . P440,000 5. Assuming that the asset was sold on January 15, 2021 fo s sold on January 15, 2021 for P19 ‘much is the gain or loss on sale? Ee 89-000, hoy 2. 730,000 loss B. P250,000 oss &.P120,000 loss .P110,000 gain PROBLEM 24-12 Noncurrent Assets held for Sale- Disposal Group On December 31, 2018, the following data are available of assets formeg disposal group under PFRS No. 5 for Zab Corp: * Carrying amount as Carrying amount Temeasured before immediately before classification as ification held for sale as held for sale Inventory 9,600,000 P 8,800,000- Investments - FVTOCI 7,200,000 6,000,000 PPE (at cost model) 22,800,000 22,800,000 PPE (at revaluation model) 18,400,000 16,000,000 Goodwill 6,000,000, 6,000,000 Total P64,000,000 P59,600,000. ‘The fair value less costs to sell of the disposal group amounted to P52,000,000 while the revaluation surplus of the PPE (at revaluation model) before classification as held for sale and before remeasurement is P2,000,000. Questions: Based on the above data, answer the following: 1. How much is the carrying amount of the inventory after classification of the disposal group as held for sale? a. 78,541,176 cc. P8,800,000 b. P8,606,897 . P9,600,000 How much is the carrying amount of the FVTOCI after classification of the disposal group as held for sale? . 6,000,000 a. 76,405,882 b. 5,800,000 d. P7,200,000 3. How much s the impairment loss to be allocated to goodwill? a Nil ©. P1,973,684 974 (at cost modety? 100 95 437 a «ety a06 72,514,706 sch ae patent Iss fo be allocated to PPE at revauaton 0 5 godell 1,903,448 0theg 794 z ‘ 5 4. 92,029,412 b Assets held for Sale - h 4-13 Noncurrent As Investment in Associate sue 2470, che beginning balance ofthe 30% Investment in sececte 218829 rount of P5,000,000. This investment was acquired three years ago. mnamenperly recorded an amortization of undervalued assets fen pos FP 20,000 per Year. - the associate reported the following: at 9 Byaividends decla Me ary 2, 2019, the company undertook all the necessary actions to be able fy the asset as held for sale, On the same date, the fair value of asset '25,000,000 while the costs to sell total P100,000. oj dass? ousted (0 fajse 30, 2029, the associate reported the following: 600,000 income x wep awidends declared and paid on June 30 400,000 cahly 1, 2019, Dricla Co. sold the investment in associate for P4,900,000 after ‘carting selling costs of 100,000. uestions: Based onthe above data, answer the following: 1. How much is the net share in the profit of associate on December 31, 2018? aN . 270,000 % P260,000 . 290,000 2 How much is the investment in associate on December 31, 2018? a P5,215,000 5,270,000 b. P5,225,000 4. P5,290,000 5 How much is the impairment loss to be recognized on January 2, 20197 2 Nil c. 325,000 © P315,000 d. P370,000 * How much isthe net share in the profit of associate in 20197 pea c, P175,000 170000 @. P180,000 Scanned with CamScanner