Reference no: EM132584286

Entity A acquires equipment on January 1, 20x1. Information on costs is as follows:

Purchase price, gross of P10,000 trade discount 800,000

Non-refundable purchase taxes 20,000

Delivery and handling costs 40,000

Installation costs 30,000

Present value of decommissioning and restoration costs 10,000

Question 1.) How much is the initial cost of the equipment?

A. P 890,000

B. P 820,000

C. P 900,000

D. P 870,000

E. Answer not given

Question 2.) Assume the equipment has a useful life of 10 years and a residual value of P90,000. Entity A uses the straight line method of depreciation. How much are the depreciation expense in 20x1 and the carrying amount of the equipment on December 31, 20x2, respectively?

A. Depreciation Expense - P80,000 ; Carrying amount 12/31/x2 - P640,000

B. Depreciation Expense - P80,000 ; Carrying amount 12/31/x2 - P810,000

C. Depreciation Expense - P80,000 ; Carrying amount 12/31/x2 - P730,000

D. Depreciation Expense - P80,000 ; Carrying amount 12/31/x2 - P580,000

E. Answer not given

Question 3.) Assume the equipment has a useful life of 10 years and a residual value of P90,000. Entity A uses the straight line method of depreciation. On December 31, 20x2, ENtity A revalues the equipment at a fair value of P820,000. There is no change in the residual value and the remaining useful life of the asset. How much are the revaluation surplus on December 31, 20x2 and revised depreciation expense in 20x3 and in subsequent periods, respectively?

A. Revaluation surplus - P83,000; Revised annual depreciation - P90,250

B. Revaluation surplus - P90,000; Revised annual depreciation - P91,250

C. Revaluation surplus - P89,000; Revised annual depreciation - P91,050

D. Revaluation surplus - P92,000; Revised annual depreciation - P92,150

E. Answer not given