PPE

1. Amble Inc exchanged a truck with a carrying amount of P12,000 and a fair value of P20,000 for a
truck and P2,500 cash. The cash flows from the new truck are not expected to be significantly
different from the cash flows of the old truck. The fair value of the truck received was P17,500.
At what amount should Amble record the truck received in the exchange?

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6. Cristy Company acquired a new machine which had a cash price of P2,100,000. The payment
terms are down payment P500,000, note payable in 3 equal annual installment of P600,000
each year, and 10,000 ordinary shares with par value of P20 and fair value of P35 per share.
Prioir to use, the entity incurred installation cost of P80,000. What amount of discount on note
payable should be recognized on the date of purchase?

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9. Jerusalem Motor Sales exchanged a car for a computer to be used as a noncurrent operating
asset. The following information related to this exchnahge that took place on July 31, 2014:

Carrying acmount of the car P30,000

Listed seliing price of the car 45,000

Fair value of the computer 43,000

Cash difference paid by Jerusalem 5,000

On July 31, 2014, how much profit should Jerusalem recognize on this exchange?
 10. Deuteronomy Corporation has a machine costing P480,000, with an annual depreciation of
P96,000 and has accumulated depreciation of P240,000 on December 31, 2013. On April 1,
2014, when the machine has a fair value of P192,000, it is exchanged for a similar machine with
a fair value of P576,000 and the proper amount of cash is paid. The loss to be recognized on
exchange is

Government Grant

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13. The Decca Company purchased a machine for P360,000 on 1 January 2012 and received a
government grant of P50,000 towards the capital cost. Company policy is to treat the grant as a
reduction in the cost of the asset. The machine was to be depreciated on a straight-line basis
over 8 years and was estimated to have a residual value of P5,000 at the end of this period.
Under PAS 20 Government grants and government assistance, what should be the carrying
amount of the machine at 31 December 2012?

14. On January 1, 2014, Jessica Company received a consolidated grant of P12,000,000. Three
fourths of the grant will be utilized to purchase a college building for students from
underdeveloped countries. The balance of the grant is for subsidizing the tuition costs of those
students for four years from the date of grant. The building was purchased in January 2014 and
is to be depreciated using the straight line method over 10 years. The tuition costs paid in 2014
amounted to P600,000. What amount of grant income should be recognized for 2014?

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Borrowing Cost

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18. During 2014, Leah Company constructed asset costing P5,000,000. The weighted average
expenditures totaled P3,000,000. To help pay for construction, an amount of P2,200,000 was
borrowed at 10% on January 1, 2014, and funds not needed for construction were temporarily
invested in short-term securities yielding P50,000 in interest revenue. Other than the
construction funds borrowed, the only debt outstanding during the year was a P2,500,000, 10-
year, 12% note payable dated January 1, 2011. What amount of interest should be capitalized
during 2014?

19. The Gargantuar Company commenced the construction of a new packaging plant on 1 February
2014. The cost of P1,800,000 was funded from existing borrowings. The construction was
completed on 30 September 2014. Gargantuars borrowings during 2014 comprised:
Loan from Allied Bank: P800,000 at 6% per annum;
Loan from BDO: P1 million at 6.6% per annum; and
Loan from Metrobank: P3 million at 7% per annum.

The amount of borrowing costs to be capitalized in relation to the packaging plant is:
Land and Building

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Machinery

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Depreciation

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 32. Towsey Manufacturing acquired a new milling machine on April 1, 2007. The machine has a
special component that requires replacement before the end of the useful life. The asset was
originally recorded in two accounts, one representing the main unit and the other for the special
component. Depreciation is recorded by the straight-line method to the nearest month, residual
values being disregarded. On April 1, 2013, the special component is scrapped and is replaced
with a similar component. This component is expected to have a residual value of approximately
25% of cost at the end of the useful life of the main unit, and because of its materiality, the
residual value will be considered in calculating depreciation. Specific asset information is as
follows:

Main milling machine:

Purchase price in 2007 P62,400

Residual value P4,400

Estimated useful life 10 years

First special component:

Purchase price P10,000

Residual value P250

Estimated useful life 6 years

Second special component:

Purchase price P15,250

What is the depreciation charge to be recognized for the year 2013?

Weir Co. uses straight-line depreciation for its property, plant and equipment, which, stated at cost,
consisted of the following:

12/31/13 12/31/12
Land P25,000 P25,000
Buildings 195,000 195,000
Machinery and equipment 695,000 650,000
915,000 870,000
Less accumulated depreciation 400,000 370,000
Weirs depreciation expense for 2013 and 2012 was P55,000 and P50,000, respectively. What amount
was debited to accumulated depreciation during 2013 because of PPE retirements?
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37. On July 1, 2013, Joshua Corporation purchased factory equipment for P450,000. Residual value
was estimated to be P12,000. The equipment will be depreciated over ten years using the
double-declining-balance method. Counting the year of acquisition as one-half year, Joshua
should record depreciation expense for 2014 on this equipment of

38. A factory equipment with an estimated useful life of 10 years was purchased by Beirut Co on
December 30, 2010. The equipment was expected to have a residual value of P5,000 at the end
of its service life. The sum of the years digit method was used in computing depreciation. For
the year ended December 31, 2014, the depreciation applicable to this equipment was P42,000.
The cost of the factory equipment purchased on December 30, 2010 was

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Revaluation

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