1. Myrchelle Corporation was incorporated on January 2, 2021.
The following items relate to its
property and equipment transactions:
Cost of Land, which included a dilapidated apartment P3,000,000
Apartment building mortgage assumed, including related interest due at 80,000
the time of purchase
Delinquent property taxes assumed by the company 30,000
Payments to tenants to vacate the apartment building 20.000
Cost of razing the apartment building 40,000
Proceeds from sale of salvaged materials 10,000
Architects fee for new building 60,000
Building permit for new construction 40,000
Fee for title search 25,000
Survey before construction 20,000
Excavation before construction of new building 100,000
Payment to building contractor 10,000,000
Assessment by city for drainage project 15,000
Cost of grading and leveling 50,000
Temporary quarters for construction crew 80,000
Temporary building to house tools and materials 50,000
Cost of changes during construction to make newbuilding more energy 90,000
efficient
Interest cost on specific borrowing incurred during construction 360,000
Payment of medical bills of employees accidentally injuredwhile 18,000
inspecting building construction
Cost of paving driveway and parking lot 60,000
Cost of installing lights in parking lot 12,000
Premium for insurance on building during construction 30,000
Cost of open house party to celebrate opening of new building 50,000
Cost of windows broken by vandals distracted by the celebration 12,000
Question 1: Cost of Land
Question 2: Cost of Building
Question 3: Cost of Land Improvements
Question 4: Amount that should be expensed or Period Cost
Question 5: Total Depreciable Property and equipment
2. During the current year, the following transactions occurred:
A tract of land was acquired for P2,000,000 cash as a building site.
A plant facility consisting of land and building was acquired in exchange for 200, 000
sharesof the entity. On the acquisition date, each share had a quoted price of P45 on a
stock exchange. The plant facility was carried on the seller's books at P1,600,000 for land
and P5,400,000 for the building at the exchange date. Current appraised values for the
land and the building, respectively, are P2,000,000 and P8,000,000. The building has an
expected life of forty years with a P200,000 residual value.
Items of machinery and equipment were purchased at a total cost of P4,000,000.
Additional costs incurred were freight and unloading P100,000 and installation
P300,[Link] equipment has a useful life of ten years with no residual value.
Expenditures totaling P1,200,000 were made for new parking lot, street and sidewalks at
the entity's various plant locations. These expenditures had an estimated useful life of
fifteen years.
Research and development costs were P1,100,000 for the year.
A machine costing P200,000 on January 1, 2014 was scraped
A machine was sold for P500,000 on July 1, 2021. Original cost of the machine sold was
P700,000 on January 1, 2018, and it was depreciated on the straight-line basis over an
estimated useful life of eight years and a residual value of P50,000
On December 31, 2021:
Question 1: Cost of Land
Question 2: Cost of Land Improvements
Question 3: Cost of Buildings
Question 4: Cost of machinery and equipment
3. Melissa Company is contemplating exchanging a machine used in its operations for a similar
machine on May 31, 2021, It will exchange machines with either A Corporation or B Company,
or will trade in the machine with C, Inc., a dealer in these machines. The cash flows from the
asset received are expected to significantly differ from the cash flows of the asset given up. The
data relating to the machines are presented below:
Melissa company A B C
Original cost of machine P162,500 P180,000 P150,000 P140,000
Accumulated depreciation
through May 31, 2021 98,500 70,000 65,000 0
Fair value on May 31, 2021 80,000 95,000 60,000 165,000
Question 1: If the company exchanges its used machine and P15,000 cash for A's used machine,
the gain/(loss) that the company should recognized from this transaction for financial reporting
purposes would be:
Question 2: If the company exchanges its used machine for B's used machine and also receives
P20,000 cash, the gain/(loss) that the company should recognize from this transaction for
financial reporting purposes would be:
Question 3: If the company exchanges its used machine and P85,000 cash for C's machine, the
gain/(loss) that the company should recognize from this transaction for financial reporting
purposes would be:
4. John Corporation provided the following information with respect to its building:
◦ The building was acquired on January 1, 2016 at a cost of P7,800,000 with an estimated
useful life of 40 years and salvage value of P200,000. Yearly depreciation was computed
using the straight-line method.
◦ The building was renovated on January 1, 2018 at a cost of P760,000. This was
considered as improvement. Salvage value did not change.
On January 1, 2021, the management decided to change the total life of the building to 30
years.
What is the deprecation for 2021?
5. On January 1, 2020, Louise Company purchased a new machine for P4,000,000. The new
machine has an estimated useful life of eight years and the salvage value was estimated to be
P400,[Link] was computed on the sum-of-the-years-digits method. What amount
should be shown in the balance sheet as of December 31, 2021, net of accumulated
depreciation for this machine?
6. Khariza Company purchased factory equipment which was installed and put into service on
January3, 2020 at a total cost of P1,280,000. Salvage value was estimated at P80,000. The
equipment is being depreciated over 8 years by the double declining balance method. For the
year 2021, how much depreciation expense should it record on this equipment?
7. Sheyne Company started operations on January 2, 2019 and has acquired three assets which
it classified under property, plant and equipment for a lump sum price of P2,400,000. The
carrying amount and fair values of each are provided as follows:
Carrying Amount Fair Value
Delivery Trucks P 1,200,000 P 1,680,000
Latching Machine 300,000 420,000
Office Equipment 400,000 700,000
Depreciation Method Salvage Value Estimated useful life
Delivery Trucks Straight line P80,000 8 years
Latching Machine Double-declining 5,000 4 years
Office Equipment SYD 15,000 6 years
Question 1: Assuming that the delivery trucks were sold on October 12, 2020 for P1,200,000,
the amount of gain/loss to be included in the company's income statement is
Question 2: The carrying amount of the office equipment to be presented in the December 31,
2021 balance sheet of the company is
Question 3: The total depreciation expense to be reported in the 2022 income statement of the
company is
Impairment Loss/Revaluation Surplus
1. On January 1, 2021, the historical balances of the land and building of Roberto Company are:
Cost Accumulated Depreciation
Land P 50,000,000
Building 300,000,000 P 90,000,000
The land and building were appraised on same date and the revaluation revealed the following:
Land P 70,000,000
Building 315,000,000
There were no additions or disposals during 2021. Depreciation is computed on the straight
line. The estimated life of the building is 20 years.
Question 1: The depreciation for the building for 2021
Question 2: The December 31, 2021 statement of financial position should show revaluation
surplus at
2. On June 30, 2021, an entity reported the following information:
Equipment at cost P30,000,000
Accumulated Depreciation 10,500,000
The equipment was measured using the cost model and depreciated on a straight-line basis
over 10-year period. On December 31, 2021, the management decided to change the basis of
measuring the equipment from the cost model to the revaluation model. The equipment was
revalued to the fair value of P27,000,000 with remaining useful life of 5 years. The income tax
rate is 30%. What amount should be reported as revaluation surplus on December 31, 2021?
3. On January 1, 2017, the Jesus Corporation purchased a machine for P1,300,000 which it
installed in a rented factory. It is depreciating the machine over 12 years by the straight-line
method to a residual value of P100,000. Late in 2021, because of increasing competition in the
industry, the company believes that its asset may be impaired and will have a remaining useful
life of 5 years, over which it estimates the asset will produce total cash inflows of P2,000,000
and will incur total cash outflows of P1,650,000. The cash flows are independent of the
company's other activities and will occur evenly each year. The company's discount rate is 10%.
The PV of ordinary annuity of P1 at 10% 5 periods is 3.7908. The fair value of the machine is
P280,000. The cost to sell the machine is P40,000. The impairment loss to be recognized in 2021
profit or loss is?
4. Patricia Company reported an impairment loss of P2,000,000 in 2020. This loss was related to
an item of property, plant and equipment which was acquired on January 1, 2019 with cost of
P10,000,000, useful life of 10 years and no residual value. On December 31, 2020, the entity
reported this asset at P6,000,000 which is the fair value on such date. On December 31, 2021,
the entity determined that the fair value of the impaired asset had increased to P7,500,000. The
straight-line method is used in recording depreciation. What amount of gain on reversal of
impairment should be reported in the 2021 income statement?