Reference no: EM132669737
On January 1, 2019, Holt Corporation purchased a machine by issuing a noninterest-bearing note requiring ten payments of P350,000, payable at the start of each year. The prevailing market rate for obligations of this nature is 8%. The company also incurred the following costs in relation to the machine: transportation, P51,000; installation, P85,000; testing, P68,000; insurance for the year, P26,000; training for machine operator, P43,000; and safety rails and platform, P101,000. The machinery is ascertained to have a 10-year useful life.
The contract with the supplier calls for payment of dismantling and decommissioning costs. Holt is required to pay P310,000 at the end of the contract (e.g. end of Year 10). The appropriate discount rate on the commencement date is 5.4%, and 4.9% as at December 31, 2019.
Holt Corporation also entered into a separate service contract with the vendor for quarterly repairs on January 1, 2019. Quarterly payments of P50,000 are payable at the end of each quarter.
Question 1: How much is the initial cost of the machine?
Question 2: How much is the depreciation expense for the year ended December 31, 2019?
Question 3: How much is the total interest expense for the year ended December 31, 2019?
Question 4: What is the amount of asset retirement obligation to be presented in the statement of financial position as at December 31, 2019?
Question 5: What is the carrying amount of the notes payable - net of current portion, as at December 31, 2019?
Question 6: What is the carrying amount of the machine as at December 31, 2019?