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PROBLEM 1 You were hired by Charie Company during Required: Compute the adjusted carrying amount of the
PPE for each item, i.e., 1 to 9, as of December 31, 2019. (10
2019 as their new Accountant. The following were discovered
by you at the end of the year 2019. points)
1. On December 24, 2019, Charie purchased office equipment PROBLEM 2 Lecherous Company traded a used
for 400,000, terms 2/5, n/15. No entry was made on the date equipment for a newer model with Aldrian, a dealer.
of purchase. The same was paid on December 31, 2019 Old equipment:
and the former accountant debited Office Equipment and Original cost 1,000,000
credited Cash for 400,000. Accumulated depreciation 500,000
Fair Value 650,000
2. Machine C, with a cash price of 128,000, was purchased on Trade-in value 400,000
January 2, 2019. The company paid 20,000 down and
10,000 for 12 months. The last payment was made on New equipment:
December 30, 2019. Straight line depreciation based on a List Price 1,600,000
5-year useful life and no salvage value was recorded at Cash Price without trade-in 1,350,000
28,000 for the year. Freight of 4,000 on Machine C was Cash Payment with trade-in 950,000
debited to the Freight in account
Required: (5 points)
3. Machine P with a cash selling prices of 360,000 was 1. What is the initial carrying amount of the new
acquired on April 1, 2019 in exchange for 400,000 face equipment acquired by Lecherous Company?
amount of bonds payable selling at 94, and maturing on 2. Describe and compute for the amount to be presented
April 1, 2029. The accountant recorded acquisition by a as component of profit or loss as a result of the
debit to Machinery and a credit to Bonds Payable for transaction in Lecherous’ statement of
400,000. Straight line Depreciation was recorded based on comprehensive income.
a 5-year economic life and amounted to 54,000 for nine 3. If the fair value of the old equipment cannot be
months. In the computation of depreciation, residual value determined reliably, would your answer be the same
of 40,000 was used. in number 1? If “yes”, why? If “no”, give the correct
amount.
4. Machine A was acquired on January 22, 2019, in exchange 4. Provide the entry to record the transaction in Aldrian’s
for past due accounts receivable of 140,000 on which books.
allowance of 20% was established at the end of 2018. The 5. Assuming the transaction lacks commercial
current fair value of the machine on January 22 was substance, what is the initial carrying amount of the
estimated at 110,000. The machine was recorded by a debit new equipment in the books of Lecherous?
PROBLEM 3 At the beginning of current year 2019, PROBLEM 4 Hilarious Company provided the following
Obvious Company provided the following: data pertaining to a machinery on December 31, 2019
Building – SL, 25 years The following occurred during the life of the machinery:
Machinery and Equipment – SL, 10 years
Land Improvements – DDB The entity revalued the machinery on December 31, 2019
Leasehold Improvements – SYD and determined that its replacement cost is
P5,000,000.The entity also made the following changes in
On January 9, 2019, a plant facility consisting of land and estimates:
building was acquired from another entity in exchange for a. The revised residual value is 300,000.
25,000 shares of Obvious Company. b. Remaining economic life is 5 years.
On this date, the share had a market price of P50. Current On December 31, 2020, the entity determined that the
fair values of land and building are P150,000 and replacement cost of the machinery is P3,800,000. The
P600,000, respectively. entity made the necessary revaluation.
On March 13, 2019, new parking lot, street and sidewalk On December 31, 2022, the entity determined that the
at the acquired plant facility were completed at a total cost replacement cost of the machinery is P4,300,000. The
of P192,000. These expenditures had an estimated useful entity made the necessary revaluation.
life of 10 years and estimated residual value of P20,000.
On May 17, 2023, the entity sold the machinery at
On April 1, 2018, the company signed a ten-year lease for P650,000. The entity paid broker’s commission of
office space. Obvious Company has the option to renew P10,000.
the lease for an additional five-year period on or before
April 1, 2029. During the second half of April 2019, the Required: (12 points)
Company incurred the following costs:
1. Compute the OCI item balance as of December 31,
- P900,000 for general improvements to the leased 2019. (1)
premises with an estimated useful life of ten 2. Compute the revaluation decrease on December
years. 31, 2020 to be presented in the 2020 Statement of
- P100,000 for office equipment with an estimated Comprehensive income as:
useful life of ten years. a. Component of profit or loss. (2)
- P200,000 for movable assembly line equipment b. Component of other comprehensive. (2)
with useful life of 5 years. 3. Compute the revaluation increase on December
31, 2022 to be presented in the 2022 Statement of
At the time the leasehold improvement were finished, Comprehensive income as:
Obvious Company is certain as to the exercise of the c. Component of profit or loss. (2)
renewal option. d. Component of other comprehensive. (2)
4. Compute the carrying amount of the machinery to
On July 19, 2019, machinery and equipment were be presented in the statement of financial position
purchased at a total invoice cost of P340,000. Additional as of December 31, 2022. (1)
cost of P10,000 for delivery and P50,000 for installation 5. Compute the gain or (loss) on the disposal of the
were incurred. machinery. (1)
6. Compute the amount of OCI item that is
On September 12, 2019, a machine with a cost of transferred directly to the retained earnings in
P170,000 and a carrying amount of P29, 750 at date of 2023. (1)
disposition was scrapped without cash recovery.