PLANT, PROPERTY AND EQUIPMENT

A. The company bought a machine on January 1, 2006 for a purchase price of

P11,116,000, inclusive of 12% VAT and incurred the following costs: Freight of
20,000, import duties of 75,000, opening new facility 35,600, and was provided
rebates of 20,000.
1. How much is the cost of the machine?

B. The company bought a machine on January 1, 2006 for a purchase price of

P11,116,000, inclusive of 12% VAT and incurred the following costs: Freight of
30,000, import duties of 75,000, opening new facility 35,600, and was provided
rebates of 25,000 and cash discount of 5,000. The machine was revalued on
January 1, 2008 at 12,000,000.
2. How much is the revaluation surplus to be recognized?

C. The company bought a machine on January 1, 2006 for a purchase price of

P11,116,000, inclusive of 12% VAT and incurred the following costs: Freight of
27,050, import duties of 67,950, opening new facility 35,600, and was provided
rebates of 20,000. The machine was revalued on January 1, 2008 at 12,000,000
and on January 1, 2011 at 6,200,000.
3. How much is the revaluation surplus carrying balance on
January 1, 2013?

D. A company purchased equipment on January 1, 2005 for 76,000 and incurred

freight of 4,000 and installation costs of 10,000. The company estimated its life
for 20 years with no salvage value. On January 1, 2015 another equipment was
purchased to prolong the life of the original equipment for 5 years more.
4. How much is the depreciation expense to be recorded on June
30, 2015?

E.

The right to extract mineral resources from a land in Mindanao was purchased
for 330,000. Research and development costs incurred were 120,000 and 60,000
respectively. Estimated tons to be extracted were 5,000 tons. During the current
year 900 tons were extracted.
5. How much is the depletion for the year?

F. ABC Company started to construct a building to be used as a new production

plant on January 1, 2015 and was finished on December 31, 2015. To be able to

support the construction, the company applied for a loan worth 6,000,000 with
interest rate of 10.5%.

The company incurred the following costs during the following months:
Date
Costs
January 1
400,000
March 31
1,000,000
June 30
1,200,000
September
1,000,000
30
December
400,000
31
6. How much interest should the entity capitalize?

G. SME A incurred (and paid) the following expenditures in acquiring an

administration building and the land on which it is built:
Date

Costs

Additional information

1 January
land

200,000,000

20 per cent of the price is attributable to the

14 January

20,000,000
Non-refundable transfer taxes (not
included in the CU200,000,000 purchase price)

14 January
acquisition

1,000,000

19 January

10,000
Reimbursing the previous owner for
prepaying the non-refundable local government property
taxes for the six-month period ending 30 June 2013

30 June

20,000
Non-refundable annual local government
property taxes for the year ending 30 June 20X2

Throughout 2013

120,000
Day-to-day repairs and maintenance,
including the osts of the administration and maintenance
staff. These costs are attributable equally to each of the 10
units.

Legal costs directly attributable to the

At 31 December 2013 SME A made the following assessments:

Useful life of the building: 50 years from the date of acquisition

Residual value of the building: P20,000,000

The entity will consume the buildings future economic benefits evenly over
50 years from the date of acquisition
Fair value less costs to sell of the land and building: P250,000,000.
7. Depreciation for the year
8. Cost of Land and Buildings

H. At the beginning of the year, Eskeberlu Corporation purchased a land for a

factory site. An old building was razed for the construction of the new building.
The following are costs incurred for the year:
Purchase price of land
Demolition of old building
Excavation for basement
Land survey
Construction cost
Imputed interest on construction cost
Landfill for building site
Clearing of trees from building site
Timber sold
Temporary building used for construction activities
Legal fees- title investigation
Architect fee
9. What is the cost of the land?

3,200,000
200,000
110,000
40,000
8,500,000
140,000
190,000
100,000
30,000
290,000
50,000
300,000

I.

Tiger Cool Company received a government grant of P600,000 related to

depreciable asset acquired on January 1, 2016 for P6,600,000. The grant was
deducted from the cost of the asset with a useful life of 10 years and residual
value of P500,000. At the beginning of 2018, grant became fully repayable due
to noncompliance with conditions.
10.
What is the depreciation for 2018?

J.

During the current year, Weasley Company traded in an old machine for a newer
model.

Data relative to the old machine and new machines on the date of exchange are as
follows:
OLD MACHINE
Original cost
Accumulated Depreciation
Average published retail value

800,000
600,000
170,000

NEW MACHINE
List price
Cash price without trade in
Cash paid with trade in

1,000,000
900,000
780,000

11.
What is the cost of the new machine to be recorded in
the books of Weasley Company?

SUGGESTED ANSWERS
1. 10,000,000
2. 4,000,000
3. 720,000
4. 2,000
5. 91,800
6. 210,000
7. 3,136,000
8. 221,000,000
9. 3,550,000
10.
730,000
11.900,000