Professional Documents
Culture Documents
a.
P215,000
b.
Downpayment
Notes payable (50,000 x 3.1699)
Preference shares (500 x 110)
Cost of machine
P 50,000
158,495
55,000
P263,495
c.
Purchase price
Appraisal cost
Total cost to be allocated
Allocation:
Land
22,150,000 x 10,000/25,000
Building
22,150,000 x 12,500/25,000
Equipment
22,150,000 x 2,500/25,000
d.
e.
5-2
5-3
5-4
P22,000,000
150,000
P22,150,000
P 8,860,000
P 11,075,000
P 2,215,000
Cash price
800,000 x .90 x .98
Present value of the disposal costs
50,000 x 0.5019
Cost of equipment
P705,600
25,095
P730,695
(Uy Company)
Land
Office building
Warehouse
Managers residence
(4,500,000
(4,500,000
(4,500,000
(4,500,000
P138,000
10,300
P148,300
x 2,187,500/5,625,000)
x 2,000,000/5,625,000) + 120,000
x 937,500/5,625,000)
x 500,000/5,625,000)
(Chang Corporation)
a.
720,000 x .90
b.
Down payment
Present value of 24 monthly installments
25,000 x 21.2434
Total
1,750,000
1,720,000
750,000
400,000
P648,000
P150,000
531,085
P681,085
50,000
350,000
540,000
60,000
1,000,000
400,000
320,000
50,000
70,000
600,000
600,000-320,000 = 280,000
280,000 350,000 = 70,000 gain
(b)
Books of Planters Company
Equipment
Accumulated Depreciation-Building
Building
Books of Producers Company
Building
Accumulated Depreciation-Equipment
Equipment
5-5
1,000,000
280,000
320,000
600,000
(Abatis Forwarders)
Land
Accumulated Depreciation Trucks
Trucks
Cash
Gain on Exchange of Trucks
5-6
460,000
540,000
10,340,000
4,400,000
`
12,800,000
340,000
1,600,000
55,000
16,000
8,000
48,000
31,000
5-7
King Company
Tooling Machine
Automobile (net)
Gain on Exchange of Automobile
172,800
135,000
37,800
Princess Company
Machinery (new)
Accumulated Depreciation Machinery (old)
Loss on Exchange of Machinery
Machinery (old)
Cash
41
1,200,000
340,000
190,000
850,000
880,000
5-8
(Urban Corporation)
Land purchase
Demolition of old building
Legal fees for land acquisition
Building permit fees
Interest on loan for construction
Building construction costs
Assessment by the city government for sewer
connection
Landscaping costs*
Equipment purchased of use in excavation
(cost proceeds from sale) 800,000 640,000
Fixed overhead allocated to building
construction
Salvage from the demolished building
Total costs
Land
P2,000,000
300,000
150,000
Land
Improvements
Building
80,000
270,000
5,000,000
120,000
P350,000
160,000
100,000
(70,000)
P2,500,000
P350,000
P5,610,000
Compensation for injury to construction worker is chargeable to loss; this expenditure could have
been avoided had the company obtained insurance on its workers. If an insurance was acquired,
the amount of premiums paid may be charged to the building being constructed.
Profit on construction is not recognized anywhere in the accounts.
should be charged for the actual costs incurred in its completion.
The cost of modifications to the new building per instruction by the building inspectors is charged
to loss since this expenditure is not a necessary expense for the asset. This was incurred as a
result of the companys negligence and could have been avoided had proper planning been done.
*Landscaping costs may be charged to the land account if there is an indication that such an
expenditure is permanent in nature.
5-9
(Doy Company)
Purchase price of land
Payments to tenants to vacate premises
Demolition of old building
Legal fees for purchase contract and recording ownership
Title guarantee insurance
Proceeds from sale of salvaged materials
Total
42
P4,000,000
200,000
100,000
50,000
20,000
(10,000)
P4,360,000
5-10
(Yu Corporation)
Land
Improvements
P 10,000
110,000
Buildings
P 900,000
Machinery and
Equipment
P 980,000
2,000,000
20,000
50,000
50,000
2,000,000
60,000
140,000
P120,000
P3,020,000
400,000
P3,580,000
The interest of P150,000 is an imputed interest and is not recognized anywhere in the financial
statements.
The royalty payments of machines purchased are charged to operating expense for the period.
Land account balance at December 31, 2012 is computed as follows (for discussion only):
Cash paid
P2,500,000
Mortgage assumed
4,000,000
Legal fees, taxes and documentation expenses
50,000
Payment to squatters to vacate premises
100,000
Cost of tearing down building
120,000
Salvage from old building demolished
(150,000)
Balance, January 1, 2012
700,000
Balance, December 31, 2012
P7,320,000
5-11
5-12
P220,000
150,000
187,500
140,000
P697,500
15,000
P712,500
b.
P348,500
(Metro Company)
a.
4,000,000 x 10%
Less interest income earned on temporary investment of loan
Capitalized interest
43
P 15,000
3,900
P 18,900
P400,000
( 85,000)
P315,000
b.
c.
1,000,000 x 10%
1,000,000 x 10% x
1,000,000 x 10% x
1,000,000 x 10% x
Total interest
Less interest income
Capitalized interest
9/12
6/12
3/12
earned on temporary investment of loan
P100,000
75,000
50,000
25,000
P250,000
40,000
P210,000
P 400,000
750,000
500,000
250,000
---------P1,900,000
11.14%
P160,000
20,000
2,800,000 x 10%
1,600,000 x 10%
2,000,000 x 12%
Total interest on loans
Less capitalized interest: (1,900,000 x 10.625%*)
Interest expense for 2012
P140,000
33,420
P173,420
P280,000
160,000
240,000
P680,000
201,875
P478,125
(Lim Company)
360,000 x 12/12
600,000 x 7/12
1,500,000 x 6/12
1,500,000 x 1/12
Average accumulated expenditures
P 360,000
350,000
750,000
125,000
P1,585,000
a.
P 360,000
P 144,000
b.
44
49,000
P 311,000
49,000
95,000
46,739
141,739
5-14
(Alondra Corporation)
(a)
P4,000,000
6,000,000
6,100,000
2,200,000
-----P18,300,000
(b)
5-15
5-16
(Pifer Corporation)
(a)
Materials
Direct labor
Overhead 2,200,000 (150% x 1,000,000)
Total
1,250,000
250,000
700,000
2,200,000
(b)
Materials
Direct labor
Overhead (2,200,000 x 250/1,250)
Total
1,250,000
250,000
440,000
1,940,000
Land
Cash
Unearned Income from Government Grant
3,000,000
Building
Cash
15,000,000
15,000,000
Depreciation Expense
Accumulated Depreciation
(15,000,000/20 years)
750,000
750,000
50,000
2,950,000
45
147,500
147,500
3,000,000
2,802,500
197,500
Alternatively, the unearned income from government grant may be presented as part of
the entitys liabilities.
5-17
(Tan Company)
a.
Depreciation charges for 2012 and 2013
2012
1. SL
(800,000 80,000) / 8 = 90,000
90,000 x 9/12= 67,500
2. Hrs
720,000/100,000 hrs = 7.20/hr.
worked
7.20 x 4,500 hrs = 32,400
3. Units of 720,000/900,000 units = 0.80/unit
output
0.80 x 40,000 units = 32,000
4. SYD
720,000 x 8/36 x 9/12 = 120,000
5. DDB
2/8 = 25%
25% x 800,000 x 9/12=150,000
6. 150%
1.5/8 = 18.75%
DB
18.75% x 800,000 x 9/12= 112,500
b.
5-18
Method 3 -
b.
5-19
(Real
a.
b.
c.
Straight-line method
Sum-of-the-years digits method
320,000 80,000 = 4 year life
320,000 x 4/10 = 128,000
320,000 x 3/10 = 96,000
150% declining-balance method
1.5 4 = 37.5%
37.5% x 340,000
=
37.5% x (340,000-127,500)
=
46
2013
90,000
7.20 x 5,500 hrs = 39,600
0.80 x 60,000 units = 48,000
720,000 x 7.25/36 =145,000
800,000-150,000=650,000
25% x 650,000 = 162,500
800,000-112,500=687,500
18.75% x 687,500) =
128,906
Accum. Depr.
157,500
72,000
80,000
265,000
312,500
241,406
Carrying amount
642,500
728,000
720,000
535,000
487,500
558,594
127,500
79,688
P80,000
64,000
49,804
= P30,000
= P18,000
= P13,256
The method with the lowest carrying amount at time of sale will yield the highest amount
of gain on disposal. Therefore, the double-declining balance method will provide the
highest gain on disposal at the end of year 3.
5-20
(Citi Company)
a.
Depreciation Expense for 2012
Double-declining balance method
800,000 x 25% x
Sum-of-the-years digits method
720,000 x 8/36 x 1/2
P100,000
80,000
P175,000
5-21
P80,000
70,000
CV, end
P700,000
525,000
P800,000
230,000
P 570,000
(Asiaplus Corporation)
(a)
Depreciation Expense Equipment
Accumulated Depreciation - Equipment
(82,000-2,000)/10 = P8,000
(33,000-3,000)/6 = 5,000
(22,000-1,000)/7 = 3,000
(18,000 -2,000)/5 = 3,200
Total
P19,200
(b)
(c)
(d)
P150,000
19,200
19,200
Cash
Accumulated Depreciation Equipment (3,200 x 4)
Loss on Sale of Equipment Part
Equipment
5,000
12,800
200
Equipment
Cash
20,000
18,000
20,000
47
19,200
19,200
(Total Company)
1.
The company changes to the sum-of-the-years digits method
Cost
Less accumulated depreciation (1,100,000 10) x 4
Carrying amount of the asset, beginning of 5th year
Revised depreciation for the 5th year
760,000-100,000 = 660,000; 660,000 x 6/21
2.
5-23
(Chartered Company)
Cost
Less accumulated depreciation 30,000 x
Carrying amount, January 1, 2012
(5+4) / 15
5-25
5-26
(Standard Company)
Cost
Less accumulated depreciation:
2008 20% x 500,000
100,000
2009 20% x 400,000
80,000
2010 20% x 320,000
64,000
2011 20% x 256,000
51,200
Carrying amount, January 1, 2012
Depreciation expense for 2012
204,800 10,000 = 194,800; 194,800 5 years
(Koh Trading)
Carrying amount of the asset, January 1, 2012
Estimated remaining life in years
Depreciation expense for year ended December 31, 2012
P1,200,000
440,000
P 760,000
P 188,571
P 132,000
P 32,000
18,000
P 14,000
P 3,500
P500,000
295,200
P204,800
P 38,960
P153,600
8
P 19,200
(Carmi Company)
Cost
P378,000
Less: Accumulated Depreciation, August 1, 2012(378,00035,000)/5 x 2 137,200
Carrying value, August 1, 2012
P240,800
Overhaul costs (capitalized)
80,000
Carrying value after overhaul
P320,800
Depreciation (August December 31, 2012 see below)
22,567
Carrying value, December 31, 2012
P298,233
Depreciation for 2012
(378,000 35,000)/5 x 7/12
(320,800 50,000) / (5 2) + 2 = 270,800 / 5 x 5/12
Total
48
P40,017
22,567
P62,584
5-27
5-28
(Chu, Inc.)
Accumulated depreciation at January 1, 2012 (528,000 x 4/8)
Revised depreciation expense for 2012
528,000-264,000 = 264,000; 264,000 / 2 yrs.
Accumulated depreciation at December 31, 2012
(Lu Company)
January 1, 2012
Impairment Loss Machinery
Accumulated Depreciation
Cost
Accumulated Depreciation 1/1/12
Carrying value 1/1/12
Recoverable amount
Impairment loss
131,250
P500,000
168,750
331,250
200,000
P131,250
(Island Souvenirs)
a.
Value in use (1,500,000 700,000) x 3.7908
Residual value (500,000 x 0.6209)
b.
c.
5-30
132,000
P396,000
131,250
P264,000
90,000
90,000
3,032,640
310,450
3,343,090
7,500,000
3,343,090
4,156,910
568,618
Depreciation expense
5,600,000 / 16 years
2010
350,000
(b)
350,000
2011
350,000
350,000
Accumulated Depreciation
Recovery of Previous Impairment
Recoverable amount
Carrying value (5,600,000 700,000)
Increase in value
Limit on recovery:
Impairment loss
Recovered impairment
2,400,000 / 16 years = 150,000; 150,000 x 2 years
Limit on recovery
49
2,100,000
2,100,000
7,500,000
4,900,000
2,600,000
2,400,000
300,000
2,100,000
(c)
Cost
Accumulated depreciation (4,400,000 + 700,000 2,100,000)
Carrying amount, December 31, 2011
10,000,000
3,000,000
7,000,000
7,000,000
500,000
5-31
a.
01/01/10
b.
12/31/10
12/31/10
12/31/11
12/31/11
c.
1/1/12
12/31/12
Cost
Accum
CV
Equipment
Revaluation Surplus
Accumulated Depreciation
3,600,000-2,400,000 = 1,200,000 (50% Inc.)
50% x 4,000,000 = 2,000,000
50% x 1,600,000 = 800,000
2,000,000
1,200,000
800,000
Depreciation Expense
Accumulated Depreciation-Equipment
3,600,000 6 yrs = 600,000
600,000
Revaluation Surplus
Retained Earnings
1,200,000 6 yrs = 200,000
200,000
Depreciation Expense
Accumulated Depreciation-Equipment
600,000
Revaluation Surplus
Retained Earnings
200,000
Accumulated Depreciation-Equipment
Revaluation Surplus
Equipment
600,000
400,000
Depreciation Expense
Accumulated Depreciation-Equipment
2,000,000 4 yrs = 500,000
500,000
Revaluation Surplus
Retained Earnings
1,200,000-200,000-200,000-400,000=400,000
400,000 4 yrs = 100,000
100,000
Original
1/1/10
1/1/10
4.000M
1.600M
2.400M
+2.00M
+0.80M
+1.20M
6.000M
2.400M
3.600M
600,000
200,000
600,000
200,000
2010
and
2011
+1.20M
-1.20M
50
1,000,000
500,000
100,000
12/31/11
1/1/12
1/1/12
12//31/12
6.00M
3.60M
2.40M
-1.00M
-0.60M
-0.40M
5.00M
3.00M
2.00M
5.00M
3.50M
1.50M
5-32
(Samsung Company)
1/1/07
Machinery
Cash
12/31/07
12/31/08
3,600,000
3,600,000
360,000
Depreciation Expense
Accumulated Depreciation
360,000
Machinery
Accumulated Depreciation
Revaluation Surplus
300,000
360,000
Cost
3,600,000
720,000
2,880,000
Machinery
Accumulated Depreciation
Net
12/31/09
12/31/10
12/31/10
12/31/11
12/31/12
360,000
Revalued
3,900,000
780,000
3,120,000
390,000
Revaluation Surplus
Retained Earnings (390,000 360,000)
30,000
390,000
Revaluation Surplus
Retained Earnings (390,000 360,000)
30,000
Accumulated Depreciation
Revaluation Surplus (240,000 30,000 30,000)
Revaluation Loss
Machinery
New Rev
Machinery
3,350,000
Accumulated Depreciation
1,340,000
Net
2,010,000
60,000
240,000
Increase
300,000
60,000
240,000
390,000
30,000
390,000
30,000
220,000
180,000
150,000
Ledger Bal
3,900,000
1,560,000
2,340,000
335,000
Depreciation Expense
Accumulated Depreciation
335,000
550,000
Decrease
550,000
220,000
330,000
335,000
335,000
Machinery
Accumulated Depreciation
Recovery of Previous Revaluation Loss (P & L)
Revaluation Surplus
Increase in asset value
Unrecovered revaluation loss
Initial revaluation loss
Recovered through lower depreciation
150,000 / 6 = 25,000; 25,000 x 2 years
Revaluation surplus
51
1,150,000
690,000
100,000
360,000
460,000
150,000
50,000
100,000
360,000
New Rev
Machinery
4,500,000
Accumulated Depreciation
2,700,000
Net
1,800,000
Check:
Carrying value based on cost (no revaluation loss)
(3,600,000 x 4 years) / 10 years
Revalued amount, 12/31/10
Revaluation Surplus
12/31/13
5-33
5-34
(Coco Company)
(a)
Cost
Accumulated depreciation 12/31/11 300,000/10 x 2
Carrying amount 12/31/11 before impairment
Recoverable amount
Impairment loss
Ledger Bal
3,350,000
2,010,000
1,340,000
1,440,000
1,800,000
360,000
450,000
450,000
90,000
90,000
P300,000
( 60,000)
P240,000
192,000
P 48,000
(b)
P192,000
( 24,000)
P168,000
(c)
P168,000
222,000
P 54,000
P 42,000
(Lakers, Inc.)
(a)
Cost
Accumulated depreciation 12/31/09 100,000/10
Net
Revalued amount
Revaluation surplus 12/31/09
(b)
52
Increase
1,150,000
690,000
460,000
P100,000
( 10,000)
90,000
112,500
P 22,500
P 87,500
67,375
P 20,125
( 17,500)
P 2,625
(c)
5-35
5-36
As of 1/1/12
Depreciation expense for 2012 67,375/7
Net before revaluation on 12/31/12
Revalued amount
Increase in value
Unrecovered impairment loss (2,625 x 6/7)
Revaluation surplus, December 31, 2012
P67,375
( 9,625)
57,750
73,000
P15,250
( 2,250)
P13,000
P60,000
13,000
P73,000
(Allied Company)
Purchase price
Residual value
Development costs incurred and capitalized during 2010
Depletable cost 1/1/11
Estimated supply of mineral resources
Depletion expense per ton in 2011
Number of tons removed during 2011
Depletion expense for 2009
P4,450,000
( 650,000)
750,000
P4,550,000
3,500,000
P
1.30
x 550,000
P 715,000
P4,550,000
( 715,000)
961,000
P4,796,000
4,360,000
P
1.10
700,000
P 770,000
P45,000,000
1,500,000
( 6,000,000)
1,158,000
P41,658,000
10,000,000
P
4.1658
x 1,000,000
P 4,165,800
P41,658,000
( 4,165,800)
750,000
P38,242,200
8,250,000
P
4.64
x 1,500,000
P 6,960,000
53
5-37
b.
c.
5-38
P3.00
P0.20
x 11.20
P134,400
108,000
x 11.20
P1,209,600
P4,200,000
P 280,000
( 24,000)
P 256,000
800,000
P
0.32
3.
4.
5.
12,000
360,000
P3,840,000
800,000
P
4.80
1,700,000
450,000
150,000
800,000
1,500,000
Cash
Accumulated Depreciation-Equipment
Loss on Disposal of Assets
Equipment
120,000
250,000
30,000
Equipment
Cash
298,000
400,000
298,000
Land
Income from Donated Asset
Cash
8,000,000
7,800,000
200,000
240,000
240,000
54
6.
7.
Equipment
Accumulated Depreciation-Equipment
Gain on Disposal of Assets
Equipment
Cash
Building
Cash
150,000
15,000
22,000
40,000
103,000
28,000,000
28,000,000
b.
Beginning balance
(3)
(4)
(6)
(7)
Total
Balance
5-39
1,850,000
150,000
2,000,000
(Pat Corporation)
a.
Depreciation and amortization expense for year ended December 31, 2012
Buildings
1.5/25 = 6%; (12,000,000-2,631,000) x 6%
P 562,140
Machinery and Equipment
Based on beginning balance (9,000,000 x 10%)
900,000
Less depreciation of machine destroyed
230,000 x 10% x 9/12
17,250
P 882,750
New machine
2,800,000 + 50,000 + 250,000=310,000
3,100,000 x 10% x 6/12
155,000
Total
P1,037,750
Automotive Equipment
Based on beginning balance
180,000
Less depreciation of car traded 180,000 x 2/10 36,000
P 144,000
New car (240,000 x 4/10)
96,000
Total
P 240,000
Leasehold Improvement (1,680,000 x 8/80)
P 168,000
b.
55
P(14,000)
63,000
P 49,000
D
D
C
D
A
MC6
MC7
MC8
MC9
MC10
Problems
MC26
D
MC27
B
MC28
B
MC29
D
MC30
B
MC31
D
MC32
D
MC33
C
MC34
D
MC35
C
MC36
MC37
MC38
MC39
MC40
MC41
MC42
MC43
MC44
D
C
A
MC45
MC46
MC47
MC48
MC49
B
C
MC50
MC51
D
D
B
C
B
MC11
MC12
MC13
MC14
MC15
D
B
B
D
D
MC16
MC17
MC18
MC19
MC20
D
C
A
B
D
MC21
MC22
MC23
MC24
MC25
C
B
C
C
C
56
MC52
MC53
D
C
MC54
MC55
MC56
MC57
B
C
A
MC58
MC59
MC60
MC61
MC62
MC63
MC64
MC65
MC66
MC67
MC68
D
C
MC69
MC70
57