Reference no: EM132593482

The property, plant and equipment section of the Statement of Financial Position at December 31, 2019 of May-Jo Machine Shop Co. appears as follows:

Land P 800,000

Building P1,500,000

Less: Accumulated depreciation 450,000 1,050,000

Equipment P 700,000

Less: Accumulated depreciation 400,000 300,000

Net property, plant and equipment P2,150,000

Because of good business conditions the company decided to move to a more strategic location. Transactions on the transfer of location for the year 2020 are described below:

1. The land and building on the old site were sold for P1,700,000 on January 2, 2020.

2. Equipment with a depreciated value of P150,000 (original cost, P400,000) was sold for P120,000 on April 1, 2020.

3. New equipment with an invoice price of P300,000 was purchased on May 1, 2020. A 2% discount was allowed. Delivery of the equipment to the site was P1,000 paid to the hauler and P1,500 was spent for installation.

4. The land where the company moved in as new site was given by a friend of the company President as gift on February 1, 2020. It had an appraised value of P5,000,000. However, the company paid P250,000 to the B.I.R. for taxes and other costs directly related to the land.

5. An old building on the land had to be demolished and the company paid P400,000 on this on February 15, 2020.

6. A new equipment with an invoice cost of P150,000 was purchased on October 31, 2020. The company paid P100,000 cash and was granted a trade-in allowance of P50,000 on a used equipment which had a cost of P40,000 and accumulated depreciation of P15,000.

7. May-Jo company constructed a new building at its new site for P2,800,000 on May 31,2020.

8. Extraordinary repairs on the old equipment amounting to P50,000 were made after the equipment have been moved to the new site on June 15, 2020.

9. Buildings are depreciated using straight-line with 30 year life while equipment have 10 year life with no salvage values.

Required:

Question 1) Prepare entries for the year 2020 related to the above transactions.

Question 2) How much is the gain or loss on sale and trade-in of property, plant and equipment?

Question 3) Prepare the section of the Property, Plant and Equipment for May-Jo Machine Shop Co. to be shown in the Statement of Financial Position as of December 31, 2020.