Reference no: EM132955230

Problem 1 - A piece of equipment with a carrying value of P 42,000 on January 1, 2020 meets the criteria for classification as Held for Sale on March 31, 2020. The equipment is being depreciated over 5 years on a straight-line basis and has a remaining life of 3 years as of January 1, 2020. The following additional information is available:

Fair value less cost to sell on March 31, 2020 P36,000

Fair value less cost to sell on December 31, 2020 40,000

Required -

1. Give the entries on March 31, 2020 and December 31, 2020 as a result of foregoing.

2. Assume instead that the fair value less cost to sell on December 31, 2020 decreased to P35,000. Give the entry on December 31, 2015.

Problem 2 - On January 1, 2020, IT'S SHOWTIME Corporation decided to dispose of an item of plant that is carried in its records at a cost of P= 900,000, with accumulated depreciation of P= 160,000. Depreciation on the plant since it was originally acquired has been charged of P= 10,000 per month. The plant will continue to be operated until it is sold, at which time the operations of the plant will be outsourced. The company undertook all the necessary actions to be able to classify the asset as held for sale. It is estimated that it could sell the plant for its fair value, P= 720,000, incurring P= 20,000 selling costs in the process. The plant has been depreciated at an amount of P= 10,000 per month.

On March 31, 2020, the plant had not been sold but, due to shortage of this type of plant, there had been an increase in the fair value to P= 770,000. On June 30, 2020, IT'S SHOWTIME sold the plant for P= 785,000 incurring P= 25,000 selling costs.

Required - Find the depreciation expense to be recognized in 2020?