Reference no: EM132805003

Questions -

Question 1 - Vijay Inc. purchased a three-acre tract of land for a building site for P320,000. On the land was a building with no appraised value. The company demolished the old building at a cost of P12,000, but was able to sell scrap from the building for P1,500. The cost of title insurance was P900 and attorney fees for reviewing the contract were P500. Property taxes paid were P3,000, of which P250 covered the period subsequent to the purchase date. How much is capitalized cost of the land?

Question 2 - Wendell Corporation exchanged an old truck and P25,500 cash for a new truck. The old truck had a book value of P6,000 (original cost of P25,000 less P19,000 in accumulated depreciation) and a fair value of P7,700. What is the amount of the new truck assuming the exchange has commercial substance?

Question 3 - Broadway Ltd. purchased equipment on January 1, 2016 for P800,000, estimating a five-year useful life and no residual value. In 2016 and 2017, Broadway depreciated the asset using the straight-line method. In 2018, Broadway changed to sum-of-the-years'-digits depreciation for this equipment. What depreciation would Broadway record for the year 2018 on this equipment?

Question 4 - Wendell Corporation exchanged an old truck and P25,500 cash for a new truck. The old truck had a book value of P6,000 (original cost of P25,000 less P19,000 in accumulated depreciation) and a fair value of P7,700. What amount of gain or (loss) in the exchange assuming lacks commercial substance?

Question 5 - In 2018, the internal auditors of KJI Manufacturing discovered the following material errors made in prior years:

1. Equipment was purchased on June 30, 2016 for P100,000. The purchase was incorrectly recorded as a debit to repair and maintenance expense. The equipment has a useful life of five years and no residual value.

2. On March 31, 2017, P50,000 was paid to a contractor to landscape the area around a manufacturing plant, including the installation of a sprinkler system. The expenditure was debited to the Land account. The landscaping is expected to have a 20-year useful life and no residual value.

KJI uses the straight-line method of depreciation for all depreciable assets.

How much is the total depreciation expenses for 2018?

Question 6 - Horton Stores exchanged land and cash of P5,000 for similar land. The book value and the fair value of the land were P90,000 and P100,000, respectively. Assuming that the exchange has commercial substance, how much is the gain/(loss) be recognized in this exchange?

Question 7 - Jennings Advertising Inc. reported the following in its December 31, 2018 balance sheet:

Equipment P500,000

Less: Accumulated depreciation-equipment P135,000

In a disclosure note, Jennings indicates that it uses straight-line depreciation over ten years and estimates salvage value at 10% of cost. What is the average age of the equipment owned by Jennings? (use number only)

Question 8 - On June 30, 2018, Prego Equipment purchased a precision laser-guided steel punch that has an expected capacity of 300,000 units and no residual value. The cost of the machine was P450,000 and is to be depreciated using the units-of-production method. During the six months of 2018, 24,000 units of the product were produced. At the beginning of 2019, engineers estimated that the machine can realistically be used to produce only another 230,000 units. During 2019, 70,000 units were produced. Prego would report depreciation in 2019 of what amount?

Question 9 - On January 1, 2018, Laramie Inc. acquired land for P6.2 million. Laramie paid P1.2 million in cash and signed a 6% note requiring the company to pay the remaining P5 million plus interest on December 31, 2019. An interest rate of 6% properly reflects the time value of money for this type of loan agreement. For what amount should Laramie record the purchase of land?

Question 10 - Cutter Enterprises purchased equipment for P72,000 on January 1, 2018. The equipment is expected to have a five-year life and a residual value of P6,000. Using the double-declining balance method, What is the book value on December 31, 2019?