27-1 A 4,300,000

27-2 C
Cost paid (896,000-96,000) 800,000
Cost of transporting machine 30,000
Installation cost 50,000
Testing cost 40,000
Safety rails and platform 60,000
Water device 80,000
Cost of adjustment 75,000
Estimated dismantling cost 65,000
Total cost of machine 1,200,000

Estimated dismantling cost is capitalized because the company has a present obligation as required by the
contract. In the absence of a present obligation, the estimated dismantling cost is not capitalized.

27-3 A
Second hand market value 4,500,000
Overhaul and repairs 330,000
Installation 180,000
Testing 150,000
Hauling 40,000
Safety device 300,000
Total 5,500,000

27-4 A
List price 1,400,000
Cash discount (20,000)
Freight 40,000
Installation cost 50,000
Testing cost 30,000
Total cost 1,500,000

Cost of removing the old machinery is treated as outright expense

27-5 A
Cost of material 700,000
Labor cost 430,000
Allocated overhead cost 220,000
Allocated interest cost 100,000
Cost of installation 120,000
Safety inspection cost 40,000
Total cost 1,610,000
Insurance for one year is an expense. The saving on installation is ignored.

27-6 A
Invoice cost 1,600,000
Discount (5% x 1,600,000) (80,000)
Transportation 50,000
Installation (35,000 + 15,000) 50,000
Salary of engineer (2/3 x 60,000) 40,000
Cost allowance (100,000)
Total cost 1,560,000

27-7 C (400,000+100,000+150,000) 650,000

27-8 A 1,470,000

27-9 A 1,600,000

27-10 B
Painting partitions 50,000
Major replacement of motor 500,000
Dust filters 800,000
Total capital expenditures 1,350,000

27-11 A
Initial design fee 150,000
Purchase of executive chairs and desks 200,000
Storm windows 500,000
Installation of automatic door 200,000
Overhead crane 350,000
Total capital expenditures 1,400,000

27-12 B
Continuing, frequent, and low-cost repairs 350,000
Replacement of broken gear of a machine 50,000
Total repair and maintenance expense 400,000
27-13 C
Carrying amount, July 01 500,000
Cost of new engine 140,000
Adjusted carrying amount 640,000

Proceeds of insurance policy 700,000

Adjusted carrying amount (640,000)
Gain on disposal 60,000

The various repairs of P100,000 are treated as outright expense.

27-14
1.
Materials 600,000
Labor 400,000
Installation 60,000
Trial run 30,000
Discount (40,000)
Overhead 150,000
Total 1,200,000

2. Adjusting Entries
1. Loss on retirement of old machinery 6,000
Machinery (20,000 – 14,000) 6,000

2. Purchase discount 40,000

Machinery 40,000

3. Machinery 150,000
Factory overhead 150,000

4. Profit on construction 100,000

Machinery 100,000

5. Tools 90,000
Machinery 90,000

6. Depreciation – tools 10,000

Tools (1,200,000 / 10 x (4/12) 10,000
 7. Machinery 128,600
Accumulated depreciation 40,000
Depreciation – machinery 88,600

Depreciation recorded 128,600

Correct depreciation (1,200,000 /10 x (4/12) 40,000
Over-depreciation 88,600

27-15
1. Machinery 5,000,000
Cash 5,000,000

2. Depreciation 450,000
Accumulated depreciation 450,000

3. Depreciation (3,600,000 / 6) 600,000

Accumulated depreciation 600,000

Cost 5,000,000
Accumulated depreciation:
2021 450,000
2022 450,000 900,000
Carrying amount 4,100,000
Residual value 500,000
Remaining depreciable cost 01/01/2023 3,600,000

4. Machinery 300,000
Cash 300,000

5. Depreciation (3,300,000 / 5) 660,000

Accumulated depreciation 660,000

Cost 5,300,000
Accumulated depreciation (900,000 + 600,000) 1,500,000
Carrying amount, 01/01/2024 3,800,000
Less: Residual value 500,000
Remaining depreciable amount, 01/01/24 3,300,000
27-16
1. Building 10,500,000
Cash 10,500,000
2. Depreciation 200,000
Accumulated depreciation 200,000

3. Building 3,000,000
Cash 3,000,000

Accumulated depreciation ((2,500,000 / 50) x 2) 100,000

Loss on retirement of building 2,400,000
Building 2,500,000

4. Depreciation (10,700,000-500,000 / 48) 212,500

Accumulated depreciation 212,500

Building (10,500,000+3,000,000-2,500,000) 11,000,000

Accumulated depreciation (400,000 – 100,000) (300,000)
Carrying amount, 01/01/2023 10,700,000

27-17
1. Discount on bonds payable 500,000
Machinery 500,000

Interest expense (500,000 / 10 x (9/12)) 37,500

Discount on bonds payable 37,500

Accumulated depreciation 75,000

Depreciation 75,000

Depreciation for 9 months 600,000

Depreciation for 12 months 800,000
Depreciable cost (800,000 x 5 years) 4,000,000

Per Book Adjusted

Cost 5,000,000 4,500,000
Less: Residual Value 1,000,000 1,000,000
Depreciable amount 4,000,000 3,500,000

Correct depreciation for 9 months (3,500,000 / 5 x (9/12)) 525,000

Less: depreciation recorded 600,000
Overstatement 75,000
2. Interest expense 300,000
Machinery (3,500,000 – 3,200,000) 300,000

Machinery 150,000
Freight in 150,000

Accumulated depreciation 30,000

Depreciation 30,000

Depreciation per book 700,000

Correct depreciation (3,350,000 / 5) 670,000
Overstatement 30,000

3. Loss on exchange 390,000

Machinery 390,000

Cost per book 3,000,000

Correct cost
Trade in value 150,000
Add: Cash paid 2,460,000 2,610,000
Overstatement 390,000

Trade in value 150,000

Less: carrying amount 540,000
Loss on exchange (390,000)

4. Allowance for doubtful accounts 840,000

Loss on exchange – accounts receivable 60,000
Treasury share 900,000

Per book
Machinery 4,200,000
Accounts receivable 4,200,000

Treasury shares 4,200,000

Machinery 4,200,000

Should be:
Machinery 3,300,000
Allowance for doubtful accounts (20% x 4,200,000) 840,000
 Loss on accounts receivable 60,000
Accounts receivable 4,200,000

Treasury shares 3,300,000

Machinery 3,300,000

The cost of treasury shares acquired for noncash consideration is usually measured by the recorded amount
of the noncash asset surrendered.

27-18
1. C
2. D
3. C
4. A
5. D
6. B
7. C
8. D