2014 Vol 1 Ch 5 Answers...docx

CHAPTER 5PROPERTY, PLANT AND EQUIPMENT

PROBLEMS

5-1. a. Cash price is the cost. P215,000

b. Downpayment P100,000Notes payable (70,000 x 3.3121) 231,847Cost of machine P331,847

c. Purchase price P22,000,000Appraisal cost 150,000Total cost to be allocated P22,150,000Allocation:

Land 22,150,000 x 10,000/25,000 P 8,860,000

Building 22,150,000 x 12,500/25,000 P 11,075,000

Equipment 22,150,000 x 2,500/25,000 P 2,215,000

d. Cash price 1,000,000 x .90 x .98 P882,000

Present value of the disposal costs50,000 x 0.5019 25,095

Cost of equipment P907,095

e. Purchase price 154,560/1.12 P138,000Directly attributable costs 5,000 + 2,000 + 1,500 + 1,800 10,300Total cost P148,300

5-2. (Uy Company)Land (49,500,000 x 21,875,000/56,250,000) 19,250,000Office building (49,500,000 x 20,000,000/56,250,000) + 1,200,000 18,800,000Warehouse (49,500,000 x 9,375,000/56,250,000) 8,250,000Manager’s residence (49,500,000 x 5,000,000/56,250,000) 4,400,000

5-3. (Chang Corporation)a. 720,000 x .90 P648,000b. Down payment P150,000

Present value of 24 monthly installments25,000 x 21.2434 531,085

Total P681,085

5-4. (Planters Company and Producers Company)

CashBooks of Planters Company

50,000Equipment 350,000Accumulated Depreciation-Building 540,000Loss on Exchange of Building 60,000

Building 1,000,0001M-540,000 = 460,000; 400,000 – 460,000 = 60,000 L

BuildingBooks of Producers Company

400,000Accumulated Depreciation-Equipment 320,000

Cash 50,000Gain on Exchange of Equipment 70,000Equipment 600,000

600,000-320,000 = 280,000; 350,000-280,000=70,000 G

Chapter 5- Property, Plant and Equipment

280,000 – 350,000 = 70,000 gain5-5. (Black Company and Berry Company)

Books of Black CompanyEquipment 460,000Accumulated Depreciation-Building 540,000

Building 1,000,000

Books of Berry CompanyBuilding 280,000Accumulated Depreciation-Equipment 320,000

Equipment 600,000

5-6. (Abatis Forwarders)

Land 10,340,000Accumulated Depreciation – Trucks 4,400,000

Trucks 12,800,000Cash ` 340,000Gain on Exchange of Trucks 1,600,000

5-7. (Business Processing, Inc.)

Equipment (new) 55,000Accumulated Depreciation 16,000Loss on Exchange of Equipment 8,000

Equipment ((old) 48,000Cash (64,000 – 33,000) 31,000

5-8.King Company

Tooling Machine 172,800Automobile (net) 135,000Gain on Exchange of Automobile 37,800

Princess CompanyMachinery (new) 1,200,000Accumulated Depreciation – Machinery (old) 340,000Loss on Exchange of Machinery 190,000

Machinery (old) 850,000Cash 880,000

5-9. (Urban Corporation)Land

Land Improvements BuildingLand purchase P12,000,000Demolition of old building 300,000Legal fees for land acquisition 150,000Building permit fees P 80,000Interest on loan for construction 270,000Building construction costs 15,000,000Landscaping costs* P3,500,000Equipment purchased of use in excavation

(800,000 – 640,000) 160,000Fixed overhead allocated to building construction

100,000Salvage from the demolished oldbuilding (70,000)Total costs P2,500,000 P350,000 P5,610,000

*Landscaping costs may be charged to the land account if there is an indication that such an expenditure is

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permanent in nature.

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 elsewhere in the accounts. The self-constructed asset 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 company’s negligence and could have been avoided had proper planning been done.

5-10. (Day Company)Purchase price of land P4,000,000Payments to tenants to vacate premises 200,000Demolition of old building 100,000Legal fees for purchase contract and recording ownership 150,000Delinquent property taxes on land 50,000Proceeds from sale of salvaged materials (20,000)Total P4,480,000

5-11 (Yu Corporation)Machinery

Land andLand Improvements Buildings Equipment

Balances, December 31, 2012 P7,000,000 P500,000 P 9,000,000 P 980,000Cash paid on purchase of land 4,500,000Mortgage assumed on the landbought including interest at 10% 5,000,000Legal fees, realty taxes anddocumentation expenses 50,000Payment to squatters 100,000Razing costs of old building 120,000Salvage value from buildingdemolition (150,000)Cost of fencing the property 500,000Paid to a contractor for buildingerected 12,000,000Building permit fee 20,000Excavation expenses 50,000Architect’s fees 150,000Invoice cost of machines acquired 2,000,000Freight, unloading and deliverycharges 60,000Custom duties and other charges 140,000Allowances, hotel accommodationspaid to technicians duringinstallation and test runs ofmachines 400,000Balances, December 31, 2013 P16,620,000 P1,000,000 P21,220,000 P3,580,000

The interest of P150,000 is an imputed interest and is not reported elsewhere in the financial statements.

The royalty payments of machines purchased are charged to operating expense for the period.

5-12. (Metro Company)a. P5,000,000 x 10% P500,000

Less interest income earned on temporary investment of loan ( 125,000)

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Capitalized interest P375,000

b. 1,250,000 x 10% P 125,0001,250,000 x 10% x 9/12 93,7501,250,000 x 10% x 6/12 62,5001,250,000 x 10% x 3/12 31,250Total interest P 312,500Less interest income earned on temporary investment of loan 40,000Capitalized interest P 272,500Total construction costs 5,000,000Total cost of building P5,272,500

c. Computation of average accumulated expenditures: 1,400,000 x 12/12 P1,400,0001,000,000 x 9/12 750,0001,200,000 x 5/12 500,0001,000,000 x 3/12 250,000400,000 x 0/12 ----------Average accumulated expenditures P2,900,000

Computation of weighted average interest rate:(10% x 1,600,000) + (12% x 2,000,000) 11.11%

1,600,000 + 2,000,000Interest of specific borrowing:

1,800,000 x 10% P180,000Less interest earned 10,000 P170,000

Interest on general borrowing:2,900,000 – 1,800,000 = 1,100,0001,100,000 x 11.11% 122,210

Capitalized interest P292,210

d. 2,800,000 x 10% P280,0001,600,000 x 10% 160,0002,000,000 x 12% 240,000Total interest on loans P680,000Less capitalized interest: (2,900,000 x 10.625%*) 308,125Interest expense for 2013 P371,875

* 680,000 / 6,400,000 = 10.625%

5-13. (Lim Company)3,600,000 x 12/12 P3,600,0006,000,000 x 7/12 3,500,00015,000,000 x 6/12 7,500,00015,000,000 x 1/12 1,250,000Average accumulated expenditures P15,850,000

a. Interest on specific borrowing (30,000,000 x 12%) P 3,600,000Less interest revenue earned from temporary investments of

specific borrowing 249,000Capitalized interest P 3.351,000

b. Interest on specific borrowing (12,000,000 x 12%) P 1,440,000Less interest revenue earned from temporary

investments of specific borrowing 249,000

Interest on general borrowingsP 1,191,000

15,850,000 – 12M = 3,850,000; 3,850,000 x 12.14%* 467,390Capitalized interest P 1,658,390

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** 6,800,000 ÷ 56,000,000 = 12.14%

5-14. (Alondra Corporation)(a) Average accumulated expenditures:

4,000,000 x 12/12 P 4,000,0008,000,000 x 9/12 6,000,00012,200,000 x 6/12 6,100,0008,800,000 x 3/12 2,200,0007,000,000 x 0/12 ------Average accumulated expenditures P18,300,000

Weighted average interest rate of general borrowings:

10% x 12,000,000 + 12% x 14,000,000 = 11.08%12,000,000 + 14,000,000

Capitalized interestSpecific borrowing (12% x 17 million) P2,040,000General borrowings

18,200,000 – 17,000,000 = 1,200,0001,200,000 x 11.08% 132,960

Total P2,172,960

(b) Total cost of building = Total construction cost + capitalized interest cost

= P40,000,000 + P2,172,960 = P42,172,960

5-15. (Pifer Corporation)(a) Materials P1,250,000

Direct labor 250,000Overhead 2,200,000 – (150% x 1,000,000) 700,000Total P 2,200,000

(b) Materials P1,250,000Direct labor 250,000Overhead (2,200,000 x 250/1,250) 440,000Total P 1,940,000

5-16. (Pioneer Development Corporation)(a) Land 3,000,000

Cash 50,000Unearned Income from Government Grant 2,950,000

Building 15,000,000Cash 15,000,000

Depreciation Expense 750,000Accumulated Depreciation 750,000

(15,000,000/20 years)

Unearned Income from Government Grant 147,500Income from Government Grant 147,500

(2,950,000/20 years)

(b) Property, Plant and EquipmentLand P3,000,000Less Unearned Income from Government Grant 2,802,500

P 197,500

Alternatively, the unearned income from government grant may be presented as part of the entity’s

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liabilities.

5-17. (Tan Company)a. Depreciation charges for 2012 and 2013

2012 20131. SL (800,000 – 80,000) / 8 = 90,000

90,000 x 9/12= 67,500 90,0002. Hrs 720,000/100,000 hrs = 7.20/hr.

worked 7.20 x 4,500 hrs = 32,400 7.20 x 5,500 hrs = 39,6003. Units of 720,000/900,000 units = 0.80/unit

output 0.80 x 40,000 units = 32,000 0.80 x 60,000 units = 48,0004. SYD 720,000 x 8/36 x 9/12 = 120,000 720,000 x 7.25/36 =145,0005. DDB 2/8 = 25% 800,000-150,000=650,000

25% x 800,000 x 9/12=150,000 25% x 650,000 = 162,5006. 150% DB 1.5/8 = 18.75% 800,000-112,500=687,500

18.75% x 800,000 x 9/12= 112,500 18.75% x 687,500) = 128,906

b. Carrying amount of the asset at the end of 2013 Depreciation Method Cost Accum. Depr. Carrying amount

1. Straight-line 800,000 157,500 642,5002. Hours worked 800,000 72,000 728,0003. Units of output 800,000 80,000 720,0004. SYD 800,000 265,000 535,0005. DDB 800,000 312,500 487,5006. 150% declining balance 800,000 241,406 558,594

5-18. (De Oro Company)a. Method 1 - Straight-line method

Method 2 - 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

Method 3 - 150% declining-balance method

1.5 ÷ 4 = 37.5%

37.5% x 340,000 = 127,50037.5% x (340,000-127,500)= 79,688

b. Straight line method P80,000Sum-of-the-years digits method

320,000 x 2/10 64,000150% declining balance method

37.5% x (340,000-127,500-79,688) 49,804

5-19. (Real Company)a. 2/5 = 40%; 26,400 ÷ 40% = 66,000b. 12,000 x 5 years = 60,000; 66,000 – 60,000 = 6,000 c. Carrying amounts, end of year 3

Straight-line (66,000 – 36,000) = P30,000Sum-of-the-years digits(66,000 – 48,000 ) = P18,000Double-declining balance (66,000 – 52,744) = 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 2013

2010: 25% x 800,000 x 1/2 P100,0002011: 25% x (800,000 – 100,000) 175,000

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2012: 25% x (800,000 – 275,000) 131,2502013: 25% x (800,000 – 406,250) P98,437.50

(or 800,000 x 87.5% x 75% x 75% x 25% P98,437.50b. Sales price P300,000

Carrying value on November 30, 2013Cost P800,000Less accumulated depreciation

720,000 x (3.75/8) 337,500 462,500Loss on sale P162,500

5-21. (Asiaplus Corporation)(a) Depreciation Expense – Equipment 19,200

Accumulated Depreciation - Equipment 19,200(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 = 3,200Total P19,200

(b) Cash 5,000Accumulated Depreciation – Equipment (3,200 x 4) 12,800Loss on Sale of Equipment Part 200

Equipment 18,000

(c) Equipment 20,000Cash 20,000

(d) Depreciation Expense – Equipment 19,200Accumulated Depreciations – Equipment 19,200

(e) Depreciation Expense – Equipment 20,000Accumulated Depreciation – Equipment 20,000

Components 1 – 3 = P16,000Component 4 = 20,000/5 4,000Total depreciation for P20,000

5-22. (Total Company)

a. Cost P1,200,000Less accumulated depreciation (1,100,000 ÷ 10) x 4 440,000Carrying amount of the asset, beginning of 5th year P 760,000Revised depreciation for the 5th year

760,000-100,000 = 660,000; 660,000 x 6/21 P 188,571

b. Revised depreciation for the 5th year(760,000 – 60,000) / 5 years P 140,000

c. Revised depreciation for the 5th year 760,000 / 4 years P 190,000

5-23. (Standard Company)Cost P500,000Less accumulated depreciation:

2009 20% x 500,000 100,0002010 20% x 400,000 80,0002011 20% x 320,000 64,0002012 20% x 256,000 51,200 295,200

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Carrying amount, January 1, 2013 P204,800Depreciation expense for 2013

204,800 – 10,000 = 194,800; 194,800 ÷ 5 years P 38,960

5-24. (Carmi Company)

(a) Depreciation for 2013 January 1 to August 1

(378,000 – 35,000)/5 x 7/12 P40,017August 1 to December 31

(320,800 – 50,000) / (5 – 2) + 2 = 270,800270,800 / 5 x 5/12 22,567

Total P62,584

(b) Cost P378,000Less: Accumulated Depreciation (378,000–35,000)/5 x 2 137,200Carrying value, August 1, 2013 P240,800Capitalized overhaul costs 80,000Carrying value after overhaul P320,800Depreciation, August 1 – December 31, 2013 (see above) 22,567Carrying value, December 31, 2013 P298,233

5-25. (Chu, Inc.)

Accum, depreciation balance, January 1, 2013 (528,000 x 4/8) P264,000Revised depreciation expense for 2013

528,000 – 264,000 = 264,000264,000/ 2 yrs. 132,000

Accumulated depreciation balance, December 31, 2013 P396,000

5-26. (Imaculada Company)(a) Accumulated Depreciation 137,500

Loss on Disposal of Machine Parts 112,500Machinery 250,000

To remove the carrying value ofthe replaced engine block.250,000/10 years = 25,00025,000 x 5.5 years = 137,500

Machinery 320,000Cash 320,000

To capitalize the cost of replacement.


To record depreciation for 2013.

January 1 – July 1, 2013 (prior to replacement)(1,000,000/10 years) x 6/12 50,000

July 1 – December 31, 2013 (after replacement)Carrying value, July 1

(1M/10) x 4.5 years 450,000CV of old engine block (112,500)Cost of new engine block 320,000Depreciable carrying value 657,500Remaining life ÷ 10 yrsRevised annual depreciation 65,750 x ½ 32,875

Total depreciation expense for 2013 82,875

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Alternative computation:New engine block

320,000/10 = 32,000; 32,000 x 6/12 16,000Replaced engine block

25,000 x 6/12 12,500Remaining parts of machinery

1,000,000 – 250,000 = 750,000(750,000/10) x 6/12 37,500(750,000/10 years) x 4.5 = 337,500(337,500/10 years) x 6/12 16,875


(b) Accumulated Depreciation 176,000Loss on Disposal of Machine Parts 144,000

Machinery 320,000320,000/10 years = 32,00032,000 x 5.5 years = 176,000

Machinery 320,000Cash 320,000


January 1 – July 1, 2013 (prior to replacement)(1,000,000/10 years) x 6/12 50,000

July 1 – December 31, 2013 (after replacement)Carrying value, July 1

(1M/10) x 4.5 years 450,000CV of old engine block (144,000)Cost of new engine block 320,000Depreciable carrying value 626,000Remaining life ÷ 10 yrsRevised annual depreciation 62,600 x ½ 31,300


5-27. (Remedios Company)(a) Cost of Leasehold Improvements P1,200,000

Less Accumulated Depreciation1,200,000/10 years = 120,000 x 4 yearsLease term is 10 years; Useful life is 12 years

Shorter period is 10 years 480,000

Carrying value, December 31, 2012 P 720,000

(b) Carrying value, December 31, 2012 P 720,000

Revised remaining lease term is 11 years

(10 – 4 + 5)

Remaining useful life is 8 years

(12 – 4)

Shorter period is ÷ 8 years

Depreciation expense for 2013 P 90,000

5-28. (Joice Company)(a) Recoverable amount is the higher of fair value less cost to sell

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and the asset’s value in use P420,000Fair value less cost to sell (450,000 – 30,000) P420,000Value in use

100,000 x 3.7908 P379,08020,000 x 0.6209 12,418 P391,498

(b) Carrying value of the asset, December 31, 2013 Cost P860,000Less accumulated depreciation

(810,000/9) x 4 years 360,000 P500,000Recoverable amount (see a) 420,000Impairment loss P 80,000

(c) Depreciation expense for 2013

420,000/5 years P 84,000

5-29. (Island Souvenirs, Inc.)(a) Value in use (1,500,000 – 700,000) x 3.7908 P3,032,640

Residual value (500,000 x 0.6209) 310,450Total P3,343,090

(b) Carrying value (9,000,000 – 1,500,000) P7,500,000Recoverable amount (higher between P3,200,000 and

P3,343,090) 3,343,090Impairment loss P4,156,910

(d) Revised annual depreciation

(3,343,090 – 500,000) / 5 years P 568,618

5-30. (Lu Company)Depreciation Expense 56,250

Accumulated Depreciation 56,250To record depreciation expense for 2012(500,000 – 50,000) / 8

Impairment Loss 131,250Accumulated Depreciation 131,250

To record impairment loss.Carrying value 500,000 – (56,250 x 3 years) P331,250Recoverable value 200,000Impairment loss P131,250


To record depreciation expense for 2013.(200,000 – 20,000) / 2 years

5-31. (Twin Head Corporation)

(a) Depreciation expense 2011 20125,600,000 / 16 years 350,000 350,000

(b) December 31, 2013Depreciation Expense 350,000

Accumulated Depreciation 350,000

Accumulated Depreciation 2,100,000Recovery of Previous Impairment 2,100,000

Recoverable amount 7,500,000

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Carrying value (5,600,000 – 700,000) 4,900,000Increase in value 2,600,000Limit on recovery:

Impairment loss 2,400,000Recovered impairment

2,400,000 / 16 years = 150,000; 150,000 x 2 years 300,000Limit on recovery 2,100,000

(c) Cost 10,000,000Accumulated depreciation (4,400,000 + 700,000 – 2,100,000) 3,000,000Carrying amount, December 31, 2013 7,000,000

To check: Limit on carrying value without impairment10,000,000 x 14/20 7,000,000

(d) Depreciation expense for 2014

7,000,000 / 14 years 500,000

5-32. (Coco Company)(a) Cost P300,000

Accumulated depreciation 12/31/12 (300,000/10) x 2 ( 60,000)Carrying amount 12/31/12 before impairment P240,000Recoverable amount 192,000Impairment loss P 48,000

(b) Carrying value 12/31/12 after impairment P192,0002013 depreciation (192,000/8) ( 24,000)Carrying amount 12/31/13 before recovery P168,000

(c) Carrying amount before recovery of impairment P168,000New recoverable amount 222,000Increase in value P 54,000Limit on recovery

Previous impairment P48,000Recovered in 2013 (30,000 – 24,000) (6,000)Limit on recovery P42,000

Impairment recovery to be recognized at 12/31/13 P 42,000

5-33.a.

01/01/11 Equipment 2,000,000Revaluation Surplus 1,200,000Accumulated Depreciation 800,000

3,600,000-2,400,000 = 1,200,000 (50% Inc.)50% x 4,000,000 = 2,000,000

b.50% x 1,600,000 = 800,000

12/31/11 Depreciation Expense 600,000Accumulated Depreciation-Equipment 600,000

3,600,000 ÷ 6 yrs = 600,000

12/31/11 Revaluation Surplus 200,000Retained Earnings 200,000

1,200,000 ÷ 6 yrs = 200,000


12/31/12 Revaluation Surplus 200,000Retained Earnings 200,000

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c.01/01/13 Accumulated Depreciation-Equipment 600,000

Revaluation Surplus 400,000Equipment 1,000,000


2,000,000 ÷ 4 yrs = 500,000

Revaluation Surplus 100,000Retained Earnings 100,000

1,200,000-200,000-200,000-400,000=400,000400,000 ÷ 4 yrs = 100,000

Original 1/1/11 1/1/11 2011 12/31/12 1/1/13 1/1/13 12//31/13and2012

Cost 4.000M +2.00M 6.000M - 6.00M -1.00M 5.00M 5.00MAccum 1.600M +0.80M 2.400M +1.20M 3.60M -0.60M 3.00M 3.50MCV 2.400M +1.20M 3.600M -1.20M 2.40M -0.40M 2.00M 1.50M

5-34. (Samsung Company)1/1/08 Machinery 3,600,000

Cash 3,600,000

12/31/08 Depreciation Expense (3,600,000/10) 360,000Accumulated Depreciation 360,000

12/31/09 Depreciation Expense 360,000Accumulated Depreciation 360,000

Machinery 300,000Accumulated Depreciation 60,000Revaluation Surplus 240,000

Cost Revalued IncreaseMachinery 3,600,000 3,900,000 300,000Accumulated Depreciation 720,000 780,000 60,000Net 2,880,000 3,120,000 240,000

12/31/10 Depreciation Expense (3,120,000 / 8 years) 390,000Accumulated Depreciation 390,000

Revaluation Surplus 30,000Retained Earnings (390,000 – 360,000) 30,000


Revaluation Surplus 30,000Retained Earnings (390,000 – 360,000) 30,000

12/31/11 Accumulated Depreciation 220,000Revaluation Surplus (240,000 – 30,000 – 30,000) 180,000Revaluation Loss 150,000

Machinery 550,000New Rev Ledger Bal Decrease

Machinery 3,350,000 3,900,000 550,000Accumulated Depreciation 1,340,000 1,560,000 220,000Net 2,010,000 2,340,000 330,000

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12/31/13 Depreciation Expense 335,000Accumulated Depreciation 335,000

12/31/13 Machinery 1,150,000Accumulated Depreciation 690,000Recovery of Previous Revaluation Loss (P & L) 100,000Revaluation Surplus 360,000

Increase in asset value 460,000Unrecovered revaluation loss

Initial revaluation loss 150,000Recovered through lower depreciation

150,000 / 6 = 25,000; 25,000 x 2 years 50,000 100,000Revaluation surplus 360,000

New Rev Ledger Bal IncreaseMachinery 4,500,000 3,350,000 1,150,000Accumulated Depreciation 2,700,000 2,010,000 690,000Net 1,800,000 1,340,000 460,000Check:Carrying value based on cost (no revaluation loss)

(3,600,000 x 4 years) / 10 years 1,440,000Revalued amount, 12/31/12 1,800,000Revaluation Surplus 360,000

12/31/14 Depreciation Expense 1,800,000/4 450,000Accumulated Depreciation 450,000

Revaluation Surplus (360,000 / 4 years) 90,000Retained Earnings 90,000

5-35. (Lakers, Inc.)(a) Cost P100,000

Accumulated depreciation 12/31/10 (100,000/10) ( 10,000)Net 90,000Revalued amount 112,500Revaluation surplus 12/31/10 P 22,500

(b) Carrying amount 12/31/12 (112,500 x 7/9) P 87,500Recoverable amount 67,375Decrease in value P 20,125Remaining balance of Revaluation Surplus (22,500 x 7/9) ( 17,500)Impairment loss in profit or loss P 2,625

(c) As of 1/1/13 P67,375Depreciation expense for 2013 (67,375/7) ( 9,625)Net before revaluation on 12/31/13 57,750Revalued amount 73,000Increase in value P15,250Unrecovered impairment loss (2,625 x 6/7) ( 2,250)Revaluation surplus, December 31, 2013 P13,000

To check: CV without impairment, cost model100,000 x 6/10 P60,000

Revaluation surplus, December 31, 2013 13,000

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Revalued amount, December 31, 2013 P73,000

5-36. (Allied Company)Purchase price P4,450,000Residual value ( 650,000)Development costs incurred and capitalized during 2010 750,000Depletable cost 1/1/12 P4,550,000Estimated supply of mineral resources ÷3,500,000Depletion expense per ton in 2012 P 1.30Number of tons removed during 2012 x 550,000Depletion expense for 2012 P 715,000

Depletable cost, January 1, 2012 (see above) P4,550,000Less depletion expense for 2012 ( 715,000)Add development costs incurred and capitalized during 2013 961,000Depletable cost for 2013 P4,796,000Revised estimated supply of mineral resource, 2013 ÷4,360,000Revised depletion rate per ton P 1.10Number of tons removed during 2013 700,000Depletion expense for 2013 P 770,000

5-37. (Ong Exploration Company)Purchase price P45,000,000Development costs 1,500,000Salvage value ( 6,000,000)Restoration costs at present value (2,500,000 x 0.4632) 1,158,000Depletable cost P41,658,000Estimated recovery from the property ÷10,000,000Depletion rate per metric ton P 4.1658Resources extracted during 2012 x 1,000,000Depletion expense for 2012 P 4,165,800

Depletable cost, 2012 (see above) P41,658,000Depletion expense for 2012 ( 4,165,800)Development costs in 2013 750,000New depletable cost for 2013 P38,242,200Remaining number of metric tons (9,250,000-1,000,000) ÷ 8,250,000Revised depletion per metric ton (rounded) P 4.64Number of metric tons removed during 2013 x 1,500,000Depletion expense for 2013 P 6,960,000

5-38. (Family Mining Company)Depletion rate per ton:

4,000,000 + 400,000 – 200,0001,400,000 tons P3.00

Depreciation expense per ton:300,000 – 20,0001,400,000 tons P0.20

a. Cost of ending inventory2,000 units x 6 months 12,000Production cost per unit

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(8.00 + 3.00 + 0.20) x 11.20Ending Inventory, December 31, 2013 P134,400

b. Cost of goods sold18,000 units x 6 months 108,000Production cost per unit x 11.20Cost of goods sold for 2013 P1,209,600

c. Depletable cost in 2013 P4,200,000Less depletion expense for 2013

20,000 units x 6 months 120,000Depletion rate per ton x 3.00 360,000

New depletable cost for 2014 P3,840,000Revised estimated recovery at January 1, 2014 ÷ 800,000Revised depletion rate for 2014 P 4.80

Depreciable cost in 2013 P 280,000Less depreciation expense for 2013 (120,000 units x 0.20) ( 24,000)Depreciable cost for 2014 P 256,000Revised estimated recovery at January 1, 2014 ÷ 800,000Revised depreciation rate for 2014 P 0.32

5-39. (Yap Machine Shop)a.

1. Cash 1,700,000Accumulated Depreciation-Building 450,000Loss on Disposal of Assets 150,000

Land 800,000Building 1,500,000

2. Cash 120,000Accumulated Depreciation-Equipment 250,000Loss on Disposal of Assets 30,000

Equipment 400,000

3. Equipment 298,000Cash 298,000

4. Land 8,000,000Income from Donated Asset 7,800,000Cash 200,000

5. Income from Donated Asset 240,000Cash 240,000

6. Equipment 150,000Accumulated Depreciation-Equipment 15,000

Gain on Disposal of Assets 22,000Equipment 40,000Cash 103,000

7. Building 28,000,000

b.Cash 28,000,000

Property, Plant and Equipment (Net)Beginning balance 2,150,000 (1) 1,850,000(3) 298,000 (2) 150,000(4) 8,000,000(6) 125,000

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(7) 28,000,000Total 38,813,000 Total 2,000,000Balance 36,573,000

5-40. (Pat Corporation)a. Depreciation and amortization expense for year ended December 31, 2013

Buildings1.5/25 = 6%; (12,000,000-2,631,000) x 6% P 562,140

Machinery and EquipmentBased on beginning balance (9,000,000 x 10%) P900,000

Less depreciation of machine destroyed230,000 x 10% x 9/12 17,250 P 882,750

New machine2,800,000 + 50,000 + 250,000=310,0003,100,000 x 10% x 6/12 155,000

Total P1,037,750Automotive Equipment

Based on beginning balance P180,000Less depreciation of car traded 180,000 x 2/10 36,000 P 144,000New car (240,000 x 4/10) 96,000Total P 240,000

Leasehold Improvement (1,680,000 x 8/80) P 168,000

b. Gain ( loss) from disposal of assets Car traded in

Fair value of car traded in (240,000 – 200,000) P 40,000Book value of car traded 54,000 P(14,000)

Machine destroyed by fireInsurance recovery P155,000Book value of machine (230,000 x 4/10 ) 92,000 63,000

Net gain from disposal of assets P 49,000

TheoryMULTIPLE CHOICE QUESTIONS

MC1 A MC11 B MC21 D MC31 DMC2 B MC12 A MC22 B MC32 CMC3 D MC13 D MC23 D MC33 CMC4 D MC14 D MC24 B MC34 CMC5 C MC15 B MC25 D MC35 DMC6 A MC16 B MC26 DMC7 C MC17 D MC27 CMC8 B MC18 B MC28 AMC9 C MC19 D MC29 CMC10 B MC20 B MC30 B

ProblemsMC36 D 14,400,000 x 5/20 = 3,600,000MC37 C 200,000 + 3,000 + 6,000 = 209,000MC38 D Cost of equipment is the fair value of FVPL exchangedMC39 D (800,000 – 20,000) x 12/78 x 9/12 = 90,000MC40 C 780,000 x 11.25/78 = 112,500; 90,000 + 112,500 = 202,500

800,000 – 202,500 = 597,500

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MC41 A 4,500,000 + 30,000 + 6,000 + 40,000 + 60,000 = 4,636,000 Land10,000 + 50,000 + 90,000 + 45,000 + 150,000 + 9,800,000 = 10,145,000 Building

MC42 C 1,800,000 x 10% = 180,000; 180,000 – 45,000 = 135,0002,500,000 – 1,800,000 = 700,000;7 00,000 x 9% = 63,000; 135,000+63,000=198,000

MC43 C 4,000,000 x 10% x 6/12 = 200,000750,000 x 12% x 6/12 = 45,000; 200,000 + 45,000 = 245,000

MC44 C 1,000,000 + (4,000,000÷ 2) = 3,000,000; 2,000,000 x 10% = 200,0001,000,000 x 11% = 110,000; 200,000 + 110,000 = 310,000

MC45 C 20,000 FV – cash received 3,000 = 17,000 cost;40,000 – 30,000 = 10,000; 20,000 – 10,000 = 10,000 Gain

MC46 B 20,500 – 6,000 = 14,500; 14,500 – 16,800 = 2,300MC47 A 4,500,000 + 1,320,000 + 77,000 + 53,000 = 5,950,000 total depreciable cost

112,500 + 66,000 + 9,625 + 13,250 = 201,375 total depreciation expense5,950,000 ÷ 201,375 = 29.5 yrs.

MC48 A 4,800,000 + 1,400,000 + 82,000 + 53,000 = 6,335,000 total cost201,375 ÷ 6,335,000 = 3.18%

MC49 D 4,500,000 ÷ 40 yrs. = 112,500MC50 C 77,000 x 6/36 = 12,833MC51 A 240,000 – 12,000 = 228,000; 228,000 ÷ 120 mos = 1,900; 1,900 x 63 mos = 119,700

240,000 – 119,700 = 120,300; 120,300 – 130,000 = 9,700MC52 C 270,000 x (8+7)/36 = 112,500

270,000 ÷ 8 = 33,750; 33,750 x 2 = 67,500; 112,500 – 67,500 = 45,000MC53 B 1.5/5 = 30% depreciation rate; 600,000 x 30% x ½ = 90,000

600,000 – 90,000 = 510,000; 510,000 x 30% = 153,000MC54 B 240,000 ÷ 40 = 6,000; 240,000 x .90 x.90 x .10 = 19,440; 72,000 x 2/10 = 14,400MC55 A 90,000 x (5+4+3)/15 = 72,000 reported accum depreciation under SYD

90,000 x 2/15 = 12,000MC56 C 160,000/4 = 40,000; 400,000/40,000 = 10 years

240,000 – 40,000 = 200,000; 200,000 – 65,000 = 135,000MC57 A 900,000 – 420,000 = 480,000; 480,000 – 300,000 = 180,000MC58 D (900,000 – 300,000) / 3 yrs = 100,000; 600,000 + 100,000 = 700,000MC59 D 42,000 x 55 = 2,310,000; 2,310,000/7 = 330,000; 330,000 + 5,000 = 335,000MC60 C 49,200,000 – 43,755,000 = 5,445,000; 5,445,000 ÷ 4.5 years = 1,210,000/yr

1,210,000 x 40 yrs = 48,400,000; 49,200,000 – 48,400,000 = 800,000MC61 C 54,000,000 – 6,000,000 + 7,200,000 = 55,200,000; 55,200,000 ÷ 2,400,000 = 23MC62 A 3,400,000 – 200,000 + 800,000 = 4,000,000

4,000,000 ÷ 4,000,000 = 1.00 per ton; 1.00 x 375,000 tons = 375,000MC63 B 3,600,000 ÷ 800,000 = 4.50; 4.50 x 60,000 = 270,000

96,000 – 6,000 = 90,000; 90,000 ÷ 800,000 = 0.1125; 0.1125 x 60,000 = 6,750MC64 D P0 for Quarry No. 1 since the asset is not owned.

1M– 300,000 = 700,000; 700,000 ÷ 100 M = 0.007/ton; 0.007 x 1,380,000 = 9,660MC65 B .007 x 40,000,000 = 280,000; 700,000 – 280,000 = 420,000

420,000 ÷ 20,000,000 = 0.21; 0.21 x 1,380,000 = 28,980MC66 C (8,600,000-600,000) ÷ 40 yrs = 200,000; 200,000 x 5 yrs. = 1,000,000

8,600,000-1,000,000-600,000 = 7,000,000; 7,000,000 ÷ 30 yrs = 233,333MC67 D 8,000,000 – 1,000,000 – 233,333 = 7,366,667; 7,500,000 – 7,366,667 = 133,333MC68 C 160,000 x 10 yrs = 1,600,000; 4M – 1.6M = 2.4M; 3,240,000 – 2,400,000 = 840,000MC69 B 4,000,000 ÷ 160,000 = 25 years; 25 – 10 = 15 years; 3,240,000 ÷ 15 = 216,000MC70 B 160,000 x 9 yrs. = 1,440,000; 4,000,000 – 1,440,000 = 2,560,000

2,560,000 – 500,000 = 2,060,000; 2,060,000 ÷ 16 yrs. = 128,7502,060,000 – 128,750 = 1,931,250; 3,240,000 – 1,931,250 = 1,308,950160,000–128,750=31,250; 500,000–31,250 =468,750; 1,308,750 – 468,750 = 840,000

MC71 A (360,000 ÷ 6) x 2.5 yrs = 150,000360,000 – 150,000 = 210,000 book value; 210,000 – 70,000 = 140,000 loss

MC72 D 70,000 ÷ 3.5 remaining years = 20,000; 70,000 – 20,000 = 50,000MC73 C 1,800,000 – 600,000 = 1,200,000; 600,000 ÷ 3 = 200,000

1,200,000 + 200,000 = 1,400,000MC74 C 3,000,000 – 300,000 = 2,700,000; 2,700,000 ÷ 10 = 270,000

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270,000 x 4 = 1,080,0003,000,000 – 1,080,000 = 1,920,000; 1,920,000 – 900,000 = 1,020,000

MC75 B 1,920,000 ÷ 6 yrs = 270,000 or 2,700,000 ÷ 10 yrs = 270,000

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2014 Vol 1 Ch 5 Answers...docx