Problem 1

Lory Company’s property, plant and equipment and accumulated depreciation balance at
December 31, 2009 are:

Accumulated Cost Depreciation

Machinery and equipment P 1,380,000 P 367,500
Automobiles and trucks 210,000 114,320
Leasehold improvements 432,000 108,000

Additional information:
Depreciation methods and useful lives:
Machinery and equipment – straight line; 10 years
Automobiles and trucks – 150% declining balance; 5 years, all acquired after 2000.
Leasehold improvements – straight line
Depreciation is computed to the nearest month.
Salvage values are immaterial except for automobiles and trucks, which have an estimated
salvage values equal to 10% of cost.

Other additional information:

Lory Company entered into a 12-year operating lease starting January 1, 2008. The
leasehold improvements were completed on December 31, 2007 and the facility was
occupied on January 1, 2008.
- On July 1, 2011, machinery and equipment were purchased at a total invoice cost of
P325,000. Installation cost of P44,000 was incurred.
- On August 30, 2011, Lory Company purchased new automobile for P25,000.
- On September 30, 2011, a truck with a cost of P48,000 and a carrying amount of
P30,000 on December 31, 2010 was sold for P23,500.
- On December 30, 2011, a machine with a cost of P17,000, a carrying value of P2,975 on
date of disposition, was sold for P4,000.

Questions
1. The gain on sale of truck on September 30, 2011 is:

2. The gain on sale of machinery on December 30, 2011 is:

3. The adjusted balance of the property, plant, and equipment as of December 31, 2011 is:

4. The total depreciation expense to be reported on the income statement for the year
ended December 31, 2011 is:

5. The carrying amount of property, plant, and equipment as of December 31, 2011 is: