financial accounting chapter 16 - 20

8/11/2019 Financial Accounting chapter 16 - 20

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210CHAPTER 16

Problem 16-1

1. C2. D3. D4. D5. B

Problem 16-2 Land Building

Cash paid for land and old building 1,000,000Removal of old building 50,000Pamen! !o !enan!s of old building !o va"a!e premises 15,000#r"hi!e"! fee 200,000Building permi! 30,000

$ee for !i!le sear"h 10,000%urve before "ons!ru"!ion 20,000&'"ava!ion 100,000Cos! of ne( building "ons!ru"!ed ),000,000#ssessmen! fee 5,000Cos! of grading, leveling and land*ll 45,000Drive(as and (al+s 40,000

emporar -uar!ers for "ons!ru"!ion "re( 0,000 emporar building !o house !ools and ma!erials )0,000Cos! of "ons!ru"!ion "hanges ///////// 50,000

1,145,000 ),5)0,000

Note: he "os! of repla"ing (indo(s is !rea!ed as e'pense.

Problem 16-3 Land

Land BuildingimprovementCos! of land 2,000,000egal fees 10,000Pamen! of mor!gage 50,000Pamen! of !a'es 20,000Cos! of raing building 30,000Pro"eeds from sale of ma!erials 5,000rading and drainage 15,000#r"hi!e"! fee 200,000Pamen! !o "on!ra"!or ,000,000n!eres! "os! 300,000

Drive(a and par+ing lo! 40,000Cos! of !rees, shrubs and o!her lands"aping 55,000Cos! of ins!alling ligh!s in par+ing lo! 5,000Premium for insuran"e /////// 25,000 ///////

2,120,000 ,525,000 100,000

he pamen! for medi"al bills and !he "os! of open house par! are ou!righ! e'pensesbe"ause !he are no! a ne"essar "os! of a"-uiring !he land and building.



211Problem 16-

!"#e $a#tor% Land Land building building

improvement&

Pur"hase pri"e 1,300,000 600,0007a!erials 3,200,000&'"ava!ion 100,000abor 2,500,000Remodeling 200,000Cash dis"oun!s )0,000%upervision 30,000Compensa!ion insuran"e 50,000Cleri"al and o!her e'penses 30,000Paving of s!ree!s 40,000Plans and spe"i*"a!ions 150,000egal "os! 8 land 10,000 //////// //////// //////

1,310,000 900,000 ),000,00040,000

1. he impu!ed in!eres! on "orpora!ion:s o(n mone is no! "api!aliable.2. he pamen! of "laim for in;uries no! "overed b insuran"e and !he legal "os! of in;ur

"laim are !rea!ed as e'pense.3. %aving on "ons!ru"!ion is no! re"ognied.

Problem 16-'

a'es in arrears 50,000Pamen! for land 1,000,000Demoli!ion of old building 100,000

o!al "os! of land 1,150,000

#r"hi!e"! fee 230,000Pamen! !o "i! hall 120,000Con!ra"! pri"e 5,000,000%afe! fen"e around "ons!ru"!ion si!e 35,000%afe! inspe"!ion on building

30,000Removal of safe! fen"e 20,000

o!al "os! of fa"!or building 5,435,000

Problem 1)8)

Pur"hase pri"e 3,000,000 i!le "learan"e fee 50,000

Cos! of raing old building 100,000%"rap value of old building 10,000 o!al "os! of land 3,140,000

Cons!ru"!ion "os! of ne( building ,000,000



212

Problem 16-(

Land BuildingPur"hase pri"e 1,000,000

4,000,000Remodeling 150,000%alvage ma!erials 5,000rading, leveling and o!her permanen! improvemen! 50,000Repairs //////// 10,000

1,050,0004,155,000

he repairs are "api!alied be"ause !he are ne"essar prior !o !he o""upan" andin!ended use of !he building.

Problem 16-)

Land Building*a#+iner%$air value 1,500,000 5,000,000Repairs 200,000Remodeling 300,000nvoi"e pri"e 1,000,000Dis"oun! 20,000Base ///////// ///////// 50,000

1,500,000 5,500,0001,030,000

he drive(a and par+ing lo! are "harged !o land improvemen!s.

Problem 16-, Land Building

*a#+iner%$air value 1,500,000 4,000,0001,500,000Repairs 200,000%pe"ial !a' assessmen! 30,000Pla!form 60,000Remodeling 400,000Pur"hase pri"e 00,000Dis"oun! 40,000$reigh! 20,000ns!alla!ion ///////// ///////// 30,000

1,530,000 4,)00,0002,30,000

Problem 16-10

Pur"hase pri"e 2,000,000 Con!ra"! pri"e ),000,000Commission 100,000 Plans, spe"i*"a!ion



egal fees 50,000 and blueprin! 100,000 i!le guaran!ee 10,000 #r"hi!e"!ural fee 250,000Cos! of raing old building 65,000 Cos! of ne( building ),350,000%alvage value of ma!erials 5,000Cos! of land 2,230,000

213

Problem 16-11 Lea&e+old

Land Building improvement&*a#+iner%

Balan"es, <an. 1 1,500,000 4,000,000 500,0001,000,000#"-uisi!ion of land 8 =)21> Pur"hase pri"e 3,000,000

Commission )0,000 Clearing "os! 15,000 %ale of !imber and gravel 5,000#"-uisi!ion of land 8 =)22>

Pur"hase pri"e 4,000,000 Cos! of demoli!ion 300,000?e( building>

Cons!ru"!ion "os! 5,000,000 &'"ava!ion fee 50,000 #r"hi!e"!ural design 150,000 Building permi! 40,000mprovemen!s> &le"!ri"al (or+ 350,000

Cons!ru"!ion e'!ension00,000 ' 1@2 400,000

mprovemen!s on oA"e spa"e )50,000Pur"hase of ne( ma"hine> nvoi"e pri"e 1,650,000 $reigh! 20,000 nloading "harge ///////// ///////// ///////// // 30,000Balan"es, De"ember 31 ,60,000 9,240,000 1,900,0002,00,000

he !hird !ra"! of land should be presen!ed as "urren! asse! be"ause i! (as "lassi*ed asheld for sale.

Problem 16-12 Land Land improvement& Building*a#+iner%

Balan"es, <an. 1 3,500,000 900,000 6,000,0001,500,000and a"-uired 1,250,000ssuan"e of share "api!al>



12@3) ' 4,500,000 1,500,000 24@3) ' 4,500,000 3,000,000?e( ma"hiner 3,400,000?e( par+ing lo!, s!ree! and

side(al+ 650,0007a"hiner sold //////// //////// ///////// 500,000

Balan"es, De". 31 ),250,000 1,)50,000 10,000,0004,400,000

he assessed values do no! represen! !he fair values of !he land and building bu! areused in allo"a!ing !he mar+e! value of !he share "api!al.

21

Problem 16-13 Problem 16-1

nvoi"e pri"e 3,000,000 nvoi"e "os! 4,000,000Cash dis"oun! 150,000 Dis"oun! 5E ' 4,000,000 200,000$reigh! 50,000 ranspor!a!ion 40,000

ns!alla!ion "os! 30,000 ns!alla!ion 100,000 es!ing "os! 20,000 rial run8salar of engineer 50,000

2,950,000 Cash allo(an"e )0,000 3,930,000

Problem 16-1'

Cos! paid 9),000 F 9),00000,000Cos! of !ranspor!ing ma"hine 30,000ns!alla!ion "os! 50,000

es!ing "os! 40,000%afe! rails and pla!form )0,000Ga!er devi"e 0,000

Cos! of ad;us!men! 65,000&s!ima!ed disman!ling "os! )5,000

o!al "os! of ma"hine 1,200,000

?o!e !ha! !he es!ima!ed disman!ling "os! is "api!alied be"ause !he "ompan has apre&ent obligation a& reuired b% #ontra#t. n !he absen"e of a presen! obliga!ion,!he es!ima!ed disman!ling "os! is no! "api!alied.

Problem 16-16

%e"ond hand mar+e! value 2,400,000Hverhaul and repairs 150,000ns!alla!ion 0,000

es!ing 110,000Iauling 10,000%afe! devi"e 250,000

3,000,000Problem 16-1(

1. 7a!erials )00,000 abor 400,000 ns!alla!ion )0,000



rial run 30,000 Dis"oun! 40,000 Hverhead 150,000

1,200,0002. #d;us!ing en!ries>

1. oss on re!iremen! of old ma"hiner ),000 7a"hiner 20,000 F 14,000),000

21' 2. Pur"hase dis"oun! 40,000 7a"hiner 40,000

3. 7a"hiner 150,000 $a"!or overhead 150,000

4. Pro*! on "ons!ru"!ion 100,000 7a"hiner 100,000

5. ools 90,000

7a"hiner 90,000

). Depre"ia!ion F !ools 10,000 ools 90,000 @ 3 ' 4@12 10,000

6. 7a"hiner 12,)00

#""umula!ed depre"ia!ion 40,000 Depre"ia!ion F ma"hiner ,)00

Depre"ia!ion re"orded 12,)00 Corre"! depre"ia!ion 1,200,000 @ 10 ' 4@12 40,000 Hverdepre"ia!ion ,)00

Problem 16-1)

ni!ial design fee 150,000&'e"u!ive "hairs and des+s 200,000%!orm (indo(s and ins!alla!ion 500,000ns!alla!ion of au!oma!i" door opening ss!em 200,000Hverhead "rane 350,000

o!al "api!al e'pendi!ures 1,400,000

Problem 16-1,1. #""umula!ed depre"ia!ion 400,000 oss on re!iremen! of building 1,)00,000 Building 2,000,000

Building 2,500,000Cash 2,500,000

Depre"ia!ion ,100,000 @ 20 405,000



#""umula!ed depre"ia!ion 405,000

Building 9,000,000 J 2,500,000 F 2,000,0009,500,000 #""umula!ed depre"ia!ion 1,00,000 F 400,0001,400,000

Boo+ value ,100,000

2. #""umula!ed depre"ia!ion 1,9)0,000 ' 20E 392,000 oss on re!iremen! of building 1,5),000

Building 2,500,000 ' .64 1,9)0,000

216

Building 2,500,000Cash 2,500,000

Depre"ia!ion ,132,000 @ 20 40),)00#""umula!ed depre"ia!ion 40),)00

Building 9,000,000 F 1,9)0,000 J 2,500,0009,540,000 #""umula!ed depre"ia!ion 1,00,000 F 392,0001,40,000 Boo+ value ,132,000

Problem 16-20

a. #nnual depre"ia!ion ,400,000 @ 30 20,000

#ge of building 6,000,000 @ 20,000 25 ears

b. Building 2,500,000Cash 2,500,000

". Building ,400,000 J 2,500,00010,900,000 ess> #""umula!ed depre"ia!ion 6,000,000 Boo+ value 3,900,000

d. Depre"ia!ion 3,900,000 @ 15 2)0,000#""umula!ed depre"ia!ion 2)0,000

Hriginal life30

ess> &'pired life 25 Remaining useful life, beginning of "urren! ear5 #dd> &'!ension in life 10 Revised useful life15

Problem 16-21



1. Building 10,500,000 Cash 10,500,000

2. Depre"ia!ion 200,000#""umula!ed depre"ia!ion 200,000

3. Building 3,000,000Cash 3,000,000

#""umula!ed depre"ia!ion 2,500,000 @ 50 ' 2 100,000 oss on re!iremen! of building 2,400,000

Cash 2,500,000

4. Depre"ia!ion 10,600,000 F 500,000 @ 4 212,500#""umula!ed depre"ia!ion 212,500

21(

Building 10,500,000 J 3,000,000 F 2,500,00011,000,000 #""umula!ed depre"ia!ion 400,000 F 100,000300,000 Boo+ value F 1@1@200 10,600,000

Problem 16-22

1. 7a"hiner 5,000,000Cash 5,000,000

2. Depre"ia!ion 450,000 #""umula!ed depre"ia!ion 450,000

3. Depre"ia!ion 3,)00,000 @ ) )00,000#""umula!ed depre"ia!ion )00,000

Cos! 5,000,000 #""umula!ed depre"ia!ion>

2005 450,000200) 450,000 900,000

Boo+ value 4,100,000 Residual value 500,000 Remaining depre"iable "os! F 1@1@2006 3,)00,000

4. 7a"hiner 300,000

Cash 300,000

5. Depre"ia!ion 3,300,000 @ 5 ))0,000 #""umula!ed depre"ia!ion ))0,000

Cos! 5,300,000 #""umula!ed depre"ia!ion 900,000 J )00,0001,500,000 Boo+ value F 1@1@200 3,00,000



Residual value 500,000 Remaining depre"iable "os! F 1@1@200 3,300,000

Problem 16-23

1. Depre"ia!ion )0,000 ' 3@12 15,000

#""umula!ed depre"ia!ion 15,000 #""umula!ed depre"ia!ion 40,000 J 15,000 495,000

oss on re!iremen! of s!ore e-uipmen! 105,000%!ore e-uipmen! )00,000

2. Depre"ia!ion 150,000 ' 4@12 50,000#""umula!ed depre"ia!ion 50,000

21)

Cash 100,000 #""umula!ed depre"ia!ion 1,050,000 J 50,000 1,100,000 oss on sale of oA"e e-uipmen! 300,000

HA"e e-uipmen! 1,500,000

3. Depre"ia!ion )00,000 ' 5@12 250,000#""umula!ed depre"ia!ion 250,000

Deliver e-uipmen! F ne( 5,000,000 #""umula!ed depre"ia!ion 2,)50,000 Cash 5,000,000 F 650,000 4,250,000

Deliver e-uipmen! F old 3,000,000

ain on e'"hange 650,000 F 350,000 400,000

Hriginal "os! 3,000,000 ess> #""umula!ed depre"ia!ion !o da!e 2,400,000 J 250,0002,)50,000 Boo+ value 350,000

4. #""umula!ed depre"ia!ion 1,200,000HA"e e-uipmen! 1,200,000

5. Depre"ia!ion 900,000 ' 9@12 )65,000#""umula!ed depre"ia!ion )65,000

#""umula!ed depre"ia!ion 2,600,000 J )65,000 3,365,000 $ire loss 1,125,000

7a"hiner 4,500,000

Problem 16-2

1. Dis"oun! on bonds paable 500,0007a"hiner 500,000



n!eres! e'pense 500,000 @ 10 ' 9@12 36,500Dis"oun! on bonds paable 36,500

#""umula!ed depre"ia!ion 65,000Depre"ia!ion 65,000

Depre"ia!ion for 9 mon!hs)00,000 Depre"ia!ion for 12 mon!hs )00,000 @ 9@12 00,000 Depre"iable "os! 00,000 ' 5 ears 4,000,000

Per boo/ Adu&ted Cos! 5,000,000 4,500,000 ess> Residual value 1,000,000 1,000,000 Depre"iable "os! 4,000,000 3,500,000

21,

Corre"! depre"ia!ion for 9 mon!hs 3,500,000 @ 5 ' 9@12525,000 ess> Depre"ia!ion re"orded )00,000 Hvers!a!emen! 65,000

2. n!eres! e'pense 300,0007a"hiner 3,500,000 F 3,200,000 300,000

7a"hiner 150,000$reigh! in 150,000

#""umula!ed depre"ia!ion 30,000Depre"ia!ion 30,000

Depre"ia!ion per boo+ 600,000 Corre"! depre"ia!ion 3,350,000 @ 5 )60,000 Hvers!a!emen! 30,000

3. oss on e'"hange 390,000

7a"hiner 390,000

Cos! per boo+ 3,000,000 Corre"! "os!

rade in value 150,000#dd> Cash paid 2,4)0,000 2,)10,000

Hvers!a!emen! 390,000

rade in value 150,000 ess> Boo+ value 540,000 oss on e'"hange 390,000

4. #llo(an"e for doub!ful a""oun!s 40,000 oss on e'"hange F a""oun!s re"eivable )0,000



reasur share900,000 Per boo/ 7a"hiner 4,200,000 #""oun!s re"eivable 4,200,000

reasur shares 4,200,0007a"hiner 4,200,000

+ould be 7a"hiner 3,300,000 #llo(an"e for doub!ful a""oun!s 20E ' 4,200,000 40,000 oss on a""oun!s re"eivable )0,000

#""oun!s re"eivable 4,200,000

220 reasur shares 3,300,000

7a"hiner 3,300,000

he "os! of !reasur shares a"-uired for noncash consideration is usuallmeasured b !he recorded amount of !he non"ash asse! surrendered %$#% ?o. 1.

Problem 16-2' An&er A

#llo"a!ed "os! of land 2,400,000 @ ),000,000 ' 5,500,0002,200,000Proper! !a'es 2,400 @ ),000 ' 250,000 100,000

Cos! of surve5,000


n"iden!all, !he "os! of !he building is>

#llo"a!ed "os! 3,)00 @ ),000 ' 5,500,0003,300,000Proper! !a'es 3,)00 @ ),000 ' 250,000 150,000Renova!ion 500,000

o!al "os! of building 3,950,000

Problem 16-26 An&er A

Pur"hase pri"e 4,000,000Pamen!s !o !enan!s 200,000Demoli!ion of old building 100,000egal fees 50,000

i!le insuran"e30,000Pro"eeds from sale of ma!erials 10,000




Problem 16-2( An&er

LandBuilding

Pur"hase pri"e of land )00,000egal fees for "on!ra"! 20,000#r"hi!e"! fee 0,000Demoli!ion of old building 50,000Cons!ru"!ion "os! /////// 3,500,000

o!al "os! )60,000 3,50,000

Problem 16-2) An&er

#"-uisi!ion pri"e 6,000,000Hp!ion of building a"-uired 200,000Repairs 500,000

o!al "os! 6,600,000

221

Problem 16-2, An&er

Pur"hase pri"e 250,000%hipping 5,000ns!alla!ion 10,000

es!ing 35,000

o!al "os! 300,000



#ll e'pendi!ures are "api!alied.


#ll "os!s are "api!alied.

Problem 16-33 An&er C

Con!inuing and fre-uen! repairs 400,000Repain!ing of !he plan! building 100,000Par!ial repla"emen! of roof !iles 150,000Repair and main!enan"e e'pense )50,000



Problem 16-3 An&er B

Problem 16-3' An&er B

222

CHAPTER 1(

Problem 1(-1 Problem 1(-2

1. # 1. C 2. D 2. # 3. B 3. D 4. D 4. D 5. D 5. D ). D ). B 6. D 6. C . C . B 9. C 9. #10. B 10. #

Problem 1(-3



epre#iation Table 4 traig+t Line

A##umulated 5ear Parti#ular epre#iation depre#iation Boo/

value #"-uisi!ion "os! )35,000

200 120,000 120,000 515,0002009 120,000 240,000 395,0002010 120,000 3)0,000 265,0002011 120,000 40,000 155,0002012 120,000 )00,000 35,000

)00,000

epre#iation Table 4 ervi#e Hour& *et+od

A##umulated 5ear Parti#ular epre#iation depre#iation Boo/ value

#"-uisi!ion "os! )35,000

200 14,000 ' 10 140,000 140,000495,0002009 13,000 ' 10 130,000 260,000

3)5,0002010 10,000 ' 10 100,000 360,000

2)5,0002011 11,000 ' 10 110,000 40,000

155,0002012 12,000 ' 10 120,000 )00,000

35,000 )00,000

Depre"ia!ion ra!e per hour K )00,000 @ )0,000 K 10

223

epre#iation Table 4 Produ#tion *et+od

A##umulated 5ear Parti#ular epre#iation epre#iation Boo/ value

#"-uisi!ion "os! )35,000

200 34,000 ' 4 13),000 13),000 499,0002009 32,000 ' 4 12,000 2)4,000 361,0002010 25,000 ' 4 100,000 3)4,000 261,0002011 29,000 ' 4 11),000 40,000 155,0002012 30,000 ' 4 120,000 )00,000 35,000

)00,000

Depre"ia!ion ra!e per uni! of ou!pu! K )00,000 @ 150,000 K 4



epre#iation Table 4 um o 5ear&7 igit&

A##umulated 5ear Parti#ular epre#iation depre#iation Boo/ value #"-uisi!ion "os! )35,000200 5@15 ' )00,000 200,000 200,000

435,0002009 4@15 ' )00,000 1)0,000 3)0,000265,000

2010 3@15 ' )00,000 120,000 40,000155,000

2011 2@15 ' )00,000 0,000 5)0,00065,000

2012 1@15 ' )00,000 40,000 )00,00035,000

)00,000

%LD K 1 J 2 J 3 J 4 J 5 K 15

epre#iation Table 4 ouble e#lining Balan#e

A##umulated 5ear Parti#ular epre#iation depre#iation Boo/ value

#"-uisi!ion "os! )35,000200 40E ' )35,000 254,000 254,000

31,0002009 40E ' 31,000 152,400 40),400

22,)002010 40E ' 22,)00 91,440 496,40

136,1)02011 40E ' 136,1)0 54,)4 552,604

2,29)

2012 2,29) F 35,000 46,29) )00,000 35,000

)00,000

$i'ed ra!e K 100E @ 5 K 20E ' 2 K 40E

Problem 1(-

a. %!raigh! line me!hod>

200 26,5002009 55,000

22b. Gor+ing hours me!hod>

550,000Ra!e per hour K 8888888888888888888 K 11

50,000 hours



200 3,000 hours ' 11 33,0002009 5,000 hours ' 11 55,000

". Hu!pu! me!hod>

550,000

Ra!e per uni! K 88888888888888888888 K 2.65200,000 uni!s

200 1,000 uni!s ' 2.6549,500 2009 22,000 uni!s ' 2.65

)0,500d. %um of ears: digi!s>

10 J 1%LD K 10 888888888888 K 55

2

200 10@55 ' 550,000 ' )@12 50,000

2009 <an. 18<une 30 50,000 <ul 18De". 31 9@55 ' 550,000 ' )@1245,000 95,000 e. Double de"lining balan"e>

200 560,000 ' 20E ' )@1256,000 2009 560,000 F 56,000 ' 20E 102,)00

Problem 1(-'

$i'ed ra!e K 1.00 8 .5)23 or .4366

200 500,000 ' .4366 21,502009 500,000 F 21,50 ' .4366 123,0592010 500,000 8 341,909 ' .4366 )9,19)2011 500,000 F 411,105 F 50,0003,95

450,000

Problem 1(-6

a. um o %ear&7 digit

#pril 1, 200 F 7ar"h 31, 2009 1,00,000 ' @3)240,000 #pril 1, 2009 F 7ar"h 31, 2010 1,00,000 ' 6@3)

210,000

22'

Depre"ia!ion from #pril 1 !o De"ember 31, 200 240,000 ' 9@12 10,000



Depre"ia!ion for 2009>

<anuar 1 F 7ar"h 31 240,000 ' 3@12 )0,000#pril 1 F De"ember 31 210,000 ' 9@12 156,500

216,500b. ouble de#lining balan#e

$i'ed ra!e K 100 @ K 12.5 ' 2 K 25E

200 1,200,000 ' 25E ' 9@12 225,000 2009 1,200,000 F 225,000 ' 25E243,650

Problem 1(-(

a. ervi#e +our& met+od8

9)0,000 F )0,000Depre"ia!ion ra!e per hour K 8888888888888888888888888888 K 112.50

,000 hours

200 1,000 hours ' 112.50112,500 2009 2,000 hours ' 112.50

225,000

b. um o %ear&7 digit&8

%um of half years K 45

200 9@45 ' 900,000 ' 3@)90,000

2009 <anuar 1 F 7ar"h 31 9@45 ' 900,000 ' 3@)90,000 #pril 1 F %ep!ember 30 @45 ' 900,0001)0,000 H"!ober 1 F De"ember 31 6@45 ' 900,000 ' 3@) 60,000

320,000

Problem 1(-)

a. Ra!e per uni! 900,000 @ 10,0005.00

200 5,000 ' 5 25,0002009 20,000 ' 5 100,000

b. Double de"lining balan"e>

$i'ed ra!e 100E @ ' 225E

200 920,000 ' 25E ' )@12115,000



2009 920,000 F 115,000 ' 25E 201,250

226". %um of ears: digi!s>

<ul 1 F De"ember 31, 200 900,000 ' @3) ' )@12 100,000

<anuar 1 F <une 30, 2009 900,000 ' @3) ' )@12100,000 <ul 1 F De"ember 31, 2009 900,000 ' 6@3) ' )@12 6,500 Depre"ia!ion for 2009 16,500

Problem 1(-, epre#iable Lie in

AnnualA&&et& Co&t alvage #o&t %ear&depre#iation

7a"hiner 310,000 10,000 300,000 5 )0,000HA"e e-uipmen! 110,000 10,000 100,000 10 10,000Building 1,)00,000 100,000 1,500,000 15 100,000Deliver e-uipmen! 430,000 30,000 400,000 4 100,000

2,450,000 2,300,000 260,000

a. Composi!e ra!e K 260,000 @ 2,450,000 K 11.02E

b. Composi!e life K 2,300,000 @ 260,000 K .52 ears

". Depre"ia!ion 260,000#""umula!ed depre"ia!ion 260,000

Problem 1(-10

epre#iable Lie in AnnualA&&et& Co&t alvage #o&t%ear& depre#iationBuilding ),100,000 100,000 ),000,000 20

300,0007a"hiner 2,550,000 50,000 2,500,000 5500,000&-uipmen! 1,030,000 30,000 1,000,000 10 100,000

9,)0,000 9,500,000900,000

a. Composi!e depre"ia!ion ra!e K 900,000 @ 9,)0,000 K 9.3E

b. #verage life K 9,500,000 @ 900,000 K 10.5) ears

". Depre"ia!ion 900,000#""umula!ed depre"ia!ion 900,000

d. Cash 40,000



#""umula!ed depre"ia!ion 2,510,0007a"hiner 2,550,000

e. Depre"ia!ion ))3,090#""umula!ed depre"ia!ion 9,)0,000 F 2,550,000 ' 9.3E

))3,090

22(Problem 1(-11

2003 <an. 1 7a"hiner 900,000

Cash 900,000

De". 31 Depre"ia!ion 20E ' 900,000 10,000#""umula!ed depre"ia!ion 10,000

200De". 31 Depre"ia!ion 10,000


200'De". 31 Depre"ia!ion 10,000


2006De". 31 Depre"ia!ion 10,000


Cash 10,000

#""umula!ed depre"ia!ion 160,0007a"hiner 4 ' 45,000 10,000

200(De". 31 Depre"ia!ion 620,000 ' 20E 144,000


Cash 15,000 #""umula!ed depre"ia!ion )15,000

7a"hiner 14 ' 45,000 )30,000

200)De". 31 Depre"ia!ion 9,000


Remaining "os! 90,000 ess> Balan"e of a""umula!ed depre"ia!ion 69,000

Boo+ value 11,000 ess> %alvage pro"eeds 2,000 7a'imum depre"ia!ion 9,000

Cash 2,000



#""umula!ed depre"ia!ion ,0007a"hiner 4 ' 45,000 90,000

22)Problem 1(-12

1. Hld ma"hiner overhauled 240,000 J )0,000 300,000 #""umula!ed depre"ia!ion

2005 240,000 @ 30,000 200) 30,000 2006 30,000 o!al 90,000 Boo+ value F <anuar 1, 200 210,000

Hld ma"hiner overhauled 210,000 @ 6 ears 30,000

Remaining "os! of old ma"hiner 1,152,000 F 240,000 @ 114,000 ?e( ma"hiner 4)0,00 @ ' 5@12 24,000 o!al depre"ia!ion 1),000

2. Hld ma"hiner 1,152,000 ?e( ma"hiner 4)0,00 Cos! of overhaul )0,000 o!al "os! 1,)62,00 #""umula!ed depre"ia!ion>

Balan"e F <anuar 1 432,000Depre"ia!ion for 200 1),000

)00,000 Boo+ value F De"ember 31, 200

1,062,00

Problem 1(-13

7ain ma"hine 6,500,000 @ 10 650,000$irs! "omponen! F from <anuar 1 !o #pril 1, 200 1,200,000 @ ) ' 3@1250,000%e"ond "omponen! F from #pril 1 !o De"ember 31, 2009

2,000,000 F 400,000 @ 4 ' 9@12 300,000 o!al depre"ia!ion for 200 1,100,000

he se"ond "omponen! is depre"ia!ed over !he remaining life of !he main ma"hine. heoriginal life is 10 ears and ) ears alread e'pired. hus, !he remaining life is 4 ears.

Problem 1(-1

1. ools 40,000Cash 40,000

2. ools 20,000

Cash 20,000



3. Cash 4,000 ools 4,000

4. Depre"ia!ion 4),000 ools 4),000

Balan"e of !ools a""oun! 19),000 ess> &s!ima!ed "os! on De"ember 31 150,000 Depre"ia!ion 4),000

22,

Problem 1(-1'

Retirement met+od

7ar"h 1 &le"!ri" me!ers 250,000Cash 250,000

1 Cash 20,000Depre"ia!ion 1)0,000

&le"!ri" me!ers 10,000

<ul 1 &le"!ri" me!ers 400,000Cash 400,000

De"ember 1 &le"!ri" me!ers 200,000Cash 200,000

1 Cash 15,000 Depre"ia!ion 135,000

&le"!ri" me!ers 150,000

Repla#ement met+od

7ar"h 1 Depre"ia!ion 250,000 F 20,000 230,000Cash 230,000

<ul 1 &le"!ri" me!ers 400,000Cash 400,000

De"ember 1 Depre"ia!ion 200,000 F 15,000 15,000Cash 15,000

Problem 1(-16

Retirement met+od

200) ools 120,000 Cash 120,000

Cash 300 ' 50 15,000

Depre"ia!ion 45,000 ools 300 ' 200 )0,000



200, ools 3)0,000 Cash 3)0,000

Cash 600 ' 60 49,000 Depre"ia!ion 111,000

ools 1)0,000

230

500 ' 200 100,000 200 ' 300 )0,000 Cos! of !ools re!ired 1)0,000

Repla#ement met+od

200) ools 100 ' 300 30,000Depre"ia!ion 300 ' 30 90,000

Cash 120,000

Cash 15,000 Depre"ia!ion 15,000

200, ools 200 ' 400 0,000 Depre"ia!ion 600 ' 400 20,000 Cash 3)0,000

Cash 49,000 Depre"ia!ion 49,000

9nventor% met+od

200) ools 120,000Cash 120,000

Cash 15,000 ools 15,000

Depre"ia!ion 2)5,000 F 200,000 )5,000 ools )5,000

200, ools 3)0,000 Cash 3)0,000

Cash 49,000 ools 49,000

Depre"ia!ion 511,000 8 350,000 1)1,000 ools 1)1,000

Problem 1(-1(



1. and 350,000 J 450,00000,000

and a"-uired 30,000 J 25,000 J 45,000 450,000

2. Depre"ia!ion of land improvemen!s 10,000 @ 15 12,000

3. Depre"ia!ion of building 4,500,000 F 1,050,000 ' 6.5E25,650

2314. Depre"ia!ion of ma"hiner and e-uipmen!

1,1)0,000 F )0,000 @ 10 110,000300,000 @ 10

30,000 )0,000 @ 10 ' )@123,000

143,000

5. $i'ed ra!e 100E @ 3 ' 1.5

50E

1,00,000 F 1,344,000 ' 50E22,000

Problem 1(-1)

1. Beginning balan"e 65,000 #"-uisi!ion 150,000 @ 650,000 ' 1,250,000250,000 o!al "os! of land 1,125,000

e"hni"all, !he land for unde!ermined use is an inves!men! proper!.

2. Hld 6,500,000 F 1,)44,500 ' E4),440

?e( )00,000@650,000 ' 1,250,000 K 1,000,000 ' E0,000 Depre"ia!ion F building 54,440

3. 2,250,000 @ 10 225,000 400,000 @ 10 ' )@1220,000 Depre"ia!ion F ma"hiner 245,000

4. Depre"ia!ion F leasehold improvemen!s 21),000 F 10,000 @ 5 ears21,)00 5. Depre"ia!ion F land improvemen!s 192,000 @ 12 ' 9@1212,000

Problem 1(-1,



1. Hld building 4,)62,200 ' 10E 4)6,220?e( building

Dire"! "os! 2,220,000 $i'ed 15,000 ' 25 365,000 Mariable 15,000 ' 26 405,000 o!al "os! 3,000,000

3,000,000 ' 10E 300,000 o!al depre"ia!ion 6)6,220

$i'ed ra!e 100 @ 20 ' 2 10E

232

2. Hld ma"hiner 1,30,000 @ 10 13,000 ?e( ma"hiner

nvoi"e "os! 35),000Con"re!e embedding 1,000Gall demoli!ion 6,000Rebuilding of (all 19,000

o!al "os! 400,000 400,000 @ 10 ' )@1220,000 o!al depre"ia!ion 15,000

Problem 1(-20 An&er A

Cos! of ma"hiner "ash pri"e 1,100,000ess> Residual value 50,000Depre"iable "os! 1,050,000

%!raigh! line depre"ia!ion 1,050,000 @ 10 105,000

Problem 1(-21 An&er B

%ales pri"e 2,300,000Boo+ value> Cos! 4,200,000

#""umula!ed depre"ia!ion 3,)00,000 @ 5 ' 3 2,1)0,000 2,040,000ain 2)0,000


#""umula!ed depre"ia!ion F 12@31@2006 3,600,000#dd> Depre"ia!ion for 200 550,000

o!al 4,250,000



ess> #""umula!ed depre"ia!ion on proper!, plan! and e-uipmen! re!iremen!s s-ueee 250,000#""umula!ed depre"ia!ion F 12@31@200 4,000,000


epre#iable Annual Co&t alvage #o&t Liedepre#iation# 550,000 50,000 500,000 20 25,000B 200,000 20,000 10,000 15 12,000C 40,000 40,000 5 ,000

690,000 620,000 45,000

Composi!e life K 620,000 @ 45,000 1) ears

233

Problem 1(-2 An&er

nvoi"e pri"e 4,500,000Cash dis"oun! 2E ' 4,500,000 90,000Deliver "os! 0,000ns!alla!ion and !es!ing 310,000

o!al "os! 4,00,000%alvage value 00,000Depre"iable "os! 4,000,000

Ra!e per uni! 4,000,000 @ 200,000 20

Depre"ia!ion for 200 30,000 ' 20)00,000

Problem 1(-2' An&er B

Cos! 4,000,000#""umula!ed depre"ia!ion

2006 @3) ' 3,)00,000 00,000 200 6@3) ' 3,)00,000 600,0001,500,000Boo+ value, 12@31@200 2,500,000


he *rs! !hree fra"!ions are>

200) 10@552006 9@55200 @55

hus, !he 200 depre"ia!ion of P240,000 is e-ual !o @55.



Depre"iable "os! 240,000 @ @55 1,)50,000%alvage 50,000

o!al "os! 1,600,000

Problem 1(-2( An&er B

#pril 1, 200) !o 7ar"h 31, 2006 5@15 ' 3,000,0001,000,000#pril 1, 2006 !o 7ar"h 31, 200 4@15 ' 3,000,00000,000#""umula!ed depre"ia!ion, 7ar"h 31, 200 1,00,000

Problem 1(-2) An&er A

he a""umula!ed depre"ia!ion on De"ember 31, 2006 is re"ompu!ed follo(ing a "er!ainme!hod. he same is arrived a! follo(ing !he %LD as follo(s>

%LD K 1 J 2 J 3 J 4 J 5 K 15

23

2005 5@15 ' 900,000300,000

200) 4@15 ' 900,000240,000

2006 3@15 ' 900,00010,000

#""umula!ed depre"ia!ion F 12@31@2006 620,000

#""ordingl, !he %LD is follo(ed for 200.

200 depre"ia!ion 2@15 ' 900,000120,000

Problem 1(-2, An&er B

%!raigh! line ra!e 100E @ ears 12.5E$i'ed ra!e 12.5 ' 2 25E2006 depre"ia!ion 1,20,000 ' 25E

320,000200 depre"ia!ion 1,20,000 F 320,000 ' 25E 240,000

Problem 1(-30

1. 4,000,000 F 2,5)0,000 ' 40E An&er 56),000

2. 1,00,000 ' 2@15 %LD An&er A 240,000

3. %ales pri"e 1,600,000 Boo+ value 2,00,000 F 1,344,0001,45),000 ain An&er A 244,000




%!raigh! line ra!e 100E @ 5 ears 20E$i'ed ra!e 20E ' 2 40E

200) depre"ia!ion 5,000,000 ' 40E2,000,0002006 depre"ia!ion 3,000,000 ' 40E1,200,000#""umula!ed depre"ia!ion, De"ember 31, 2006 3,200,000Depre"ia!ion for 200 F s!raigh! line 5,000,000 F 3,200,000 @ 3)00,000#""umula!ed depre"ia!ion, De"ember 31, 200 3,00,000

Problem 1(-32 An&er A

Cos! F 1@1@2005 6,200,000#""umula!ed depre"ia!ion F 12@31@2006 6,200,000 @ 10 ' 3 2,1)0,000

Boo+ value F 12@31@2006 5,040,000

%LD for !he remaining life of 6 ears 1 J 2 J 3 J 4 J 5 J ) J 62

Depre"ia!ion for 200 5,040,000 ' 6@2 1,2)0,000


#nnual depre"ia!ion 1,53),000 @ 192,000

23'


$i'ed ra!e 100E @ 4 ' 2 50E

Cos! ),000,000Depre"ia!ion for 2006 50E ' ),000,000 3,000,000Boo+ value F 1@1@200 3,000,000Residual value )00,0007a'imum depre"ia!ion in 200 2,400,000

$i'ed ra!e in 200 100E @ 2 ' 2 100E

his means !ha! !he "ompu!ers should be full depre"ia!ed in 200. %in"e !here is aresidual value of P)00,000, !he ma'imum depre"ia!ion for 200 is e-ual !o !he boo+value of P3,000,000 minus !he residual value of P)00,000 or P2,400,000.



236

CHAPTER 1)

Problem 1)-1 Problem 1)-2

1. D 1. B2. # 2. C3. # 3. C4. C 4. C5. # 5. D

Problem 1)-3

1. Hre proper! 5,000,000 Cash 5,000,000 2. Hre proper! 3,000,000 Cash 3,000,000

3. 7a"hiner 4,000,000Cash 4,000,000

4. Deple!ion 1,140,000



#""umula!ed depre"ia!ion 1,140,000

,000,000 F 400,000 K 6,)00,0006,)00,000 @ 2,000,000 K 3.0300,000 ' 3.0 K 1,140,000

5. Depre"ia!ion )00,000#""umula!ed depre"ia!ion )00,000

4,000,000 @ 2,000,000 K 2.00300,000 ' 2.00 K )00,000

Problem 1)-

200) Ro"+ and gravel proper! 9)0,000Cash 9)0,000

Deple!ion 1,000,000 ' .40 400,000#""umula!ed deple!ion 400,000

200, Ro"+ and gravel proper! 490,000Cash 490,000

Deple!ion )00,000 ' .65 450,000#""umula!ed deple!ion 450,000

23(

o!al "os! 9)0,000 J 490,000

1,450,000ess> #""umula!ed deple!ion 400,000Deple!able "os! 1,050,000Divide b es!ima!ed remaining ou!pu! 2,400,000 F 1,000,000 1,400,000Revised deple!ion ra!e per !on .65

2010 Ro"+ and gravel proper! 500,000Cash 500,000

Deple!ion 600,000 ' .44 30,000#""umula!ed deple!ion 30,000

o!al "os! 1,450,000

#dd> #ddi!ional developmen! "os! 500,000 o!al 1,950,000ess> #""umula!ed deple!ion 400,000 J 450,000

50,000 Remaining deple!able "os!1,100,000

Divide b ne( es!ima!ed remaining ou!pu!2,500,000

?e( deple!ion ra!e .44



Problem 1)-'

200) Resour"e proper! 3,9)0,000Cash 3,9)0,000

Building 9)0,000

&-uipmen! 1,240,000Cash 2,200,000

Deple!ion 12,000 ' 32 34,000#""umula!ed deple!ion 34,000

Cos! of resour"e proper! 3,9)0,000ess> Residual value

120,000 Deple!able "os!3,40,000

Divide b es!ima!ed ou!pu! 120,000Deple!ion ra!e per uni! 32

Depre"ia!ion 12,000 ' 9),000#""umula!ed depre"ia!ion F building 9),000

9)0,000Depre"ia!ion ra!e per uni! K 8888888888888888 K

120,000

he ou!pu! me!hod is used in "ompu!ing !he depre"ia!ion of !he buildingbe"ause !he life of !he resour"e proper! 5 ears or 120,000 @ 24,000 is

shor!er !han !he life of !he building ears.

23)Depre"ia!ion 310,000

#""umula!ed depre"ia!ion 310,0001,240,000 @ 4 ears K 310,000

he s!raigh! line me!hod is used for !he heav e-uipmen! be"ause !he life of4 ears is shor!er !han !he life of !he resour"e proper! of 5 ears.

200, Deple!ion 00,000#""umula!ed deple!ion 25,000 ' 32 00,000

Depre"ia!ion 25,000 ' 200,000

#""umula!ed depre"ia!ion F building 200,000

Depre"ia!ion 310,000#""umula!ed depre"ia!ion F e-uipmen! 310,000

Problem 1)-6

200) Hre proper! 5,400,000Cash 5,400,000



Hre proper! 450,000&s!ima!ed liabili! for res!ora!ion "os! 450,000

7ine improvemen!s ,000,000Cash ,000,000

200, Deple!ion )00,000 ' 2.)0 1,5)0,000#""umula!ed deple!ion 1,5)0,000

Depre"ia!ion )00,000 ' 4 2,400,000#""umula!ed depre"ia!ion 2,400,000

2010 Deple!ion 400,000 ' 1.)0 )40,000#""umula!ed deple!ion )40,000

Deple!able "os! 5,200,000ess> 2009 deple!ion 1,5)0,000Balan"e 3,)40,000 @ 2,265,000 K 1.)0 3,)40,000

7ine improvemen!s 660,000Cash 660,000

Depre"ia!ion 400,000 ' 2.0 1,120,000#""umula!ed depre"ia!ion 1,120,000

Cos! ,000,000 J 660,000 ,660,000ess> #""umula!ed depre"ia!ion 2,400,000Boo+ value ),360,000 @ 2,265,000 K 2.0

),360,000

23,Problem 1)-(

Deple!ion ra!e 5,000,000 @ 1,000,000 5.00Depre"ia!ion ra!e ,000,000 @ 1,000,000 .00

$ir&t %earDeple!ion 200,000 ' 5 1,000,000Depre"ia!ion 200,000 ' 1,)00,000

e#ond %earDeple!ion 250,000 ' 5 1,250,000Depre"ia!ion 250,000 ' 2,000,000

T+ird %earDeple!ion noneDepre"ia!ion %"hedule # 550,000

%"hedule # F Compu!a!ion of depre"ia!ion for !hird ear

Cos! of e-uipmen! ,000,000



ess> #""umula!ed depre"ia!ion 3,)00,000 Boo+ value F beginning of !hird ear

4,400,000 Divide b remaining useful life in ears 10 F 2 Depre"ia!ion for !hird ear

550,000

$ourt+ %ear

Deple!ion 100,000 ' 5 500,000Depre"ia!ion %"hedule B 600,000

%"hedule B F Compu!a!ion of depre"ia!ion for four!h ear

Cos! of e-uipmen! ,000,000 ess> #""umula!ed depre"ia!ion 4,150,000

Boo+ value F beginning of four!h ear3,50,000

Hriginal es!ima!e of resour"e deposi!s 1,000,000 !ons ess> &'!ra"!ed in *rs! and se"ond ears 450,000

Remaining ou!pu! 550,000 !ons

Depre"ia!ion ra!e per uni! 3,50,000 @ 550,000 6.00 Depre"ia!ion for !hird ear 100,000 ' 6600,000

Problem 1)-)

1. Re!ained earnings 1,500,000 #""umula!ed deple!ion 2,500,000 o!al 4,000,000 ess> Capi!al li-uida!ed 1,00,000 Deple!ion in ending inven!or 5,000 ' 20 100,000

1,900,000 7a'imum dividend 2,100,000

20

2. Re!ained earnings 1,00,000Capi!al li-uida!ed 200,000

Dividends paable 2,000,000

Problem 1)-,

1. Cash 50,000 ' 110 5,500,000%hare "api!al 50,000 ' 1005,000,000%hare premium 500,000

2. Resour"e proper! 3,000,000Cash 3,000,000

3. 7ining e-uipmen! 00,000Cash 00,000



4. Cash 5,000 ' 50 4,250,000%ales 4,250,000

5. 7ining and o!her dire"! "os! 2,2),000 #dminis!ra!ive e'penses 500,000

Cash 2,6),000

). Deple!ion 260,000#""umula!ed deple!ion 3,000,000 @ 1,000,000 ' 90,000

260,000

6. Depre"ia!ion 90,000 ' .0 62,000#""umula!ed depre"ia!ion 8 mining e-uipmen! 62,000

Depre"ia!ion ra!e 00,000 @ 1,000,000 K .0

. nven!or, De"ember 31 5,000 ' 29 145,000Pro*! and loss 145,000

7ining labor and o!her dire"! "os!s 2,2),000 Deple!ion 260,000 Depre"ia!ion 62,000 o!al produ"!ion "os!s in"urred 2,)10,000 Divide b number of uni!s e'!ra"!ed 90,000 ni! "os! 29

21

*ultinational Compan%9n#ome tatement

5ear ended e#ember 31: 200)

%ales 4,250,000Cos! of sales

7ining labor and o!her dire"! "os!s 2,2),000

Deple!ion 260,000Depre"ia!ion 62,000

o!al produ"!ion "os! 2,)10,000ess> nven!or, De"ember 31 145,000

2,4)5,000ross in"ome 1,65,000#dminis!ra!ive e'penses 500,000?e! in"ome 1,25,000



*ultinational Compan%tatement o $inan#ial Po&ition

e#ember 31: 200)

A&&et&Curren! asse!s>

Cash 3,12,000nven!or 145,000 3,326,000?on"urren! asse!s>

Resour"e proper! 3,000,000ess> #""umula!ed deple!ion 260,000 2,630,0007ining e-uipmen! 00,000ess> #""umula!ed depre"ia!ion 62,000 62,000 3,45,000

o!al asse!s ),65,000

Euit%%hare "api!al 5,000,000%hare premium 500,000Re!ained earnings 1,25,000

o!al e-ui! ),65,000

Re!ained earnings 1,25,000#dd> #""umula!ed deple!ion 260,000

o!al 1,555,000ess> nrealied deple!ion in ending inven!or 5,000 ' 315,0007a'imum dividend 1,540,000

Re!ained earnings 1,25,000Capi!al li-uida!ed 255,000

Dividends paable 1,540,000

22

Problem 1)-10

1. Pur"hase pri"e 50,000 Road "ons!ru"!ion 5,000,000 mprovemen!s and developmen! "os!s 650,000 o!al "os! 5,00,000

Residual value )00,000 Deple!able "os! 5,200,000

Deple!ion ra!e per uni! 5,200,000 @ 4,000,0001.30 Deple!ion for 200 500,000 ' 1.30 )50,000

Deple!able "os! 5,200,000 Deple!ion in 200 )50,000



Remaining deple!able "os! 4,550,000 Developmen! "os!s in 2009 1,300,000 o!al deple!able "os! F 1@1@2009 5,50,000

Hriginal es!ima!ed !ons 4,000,000 #ddi!ional es!ima!e 3,000,000

o!al es!ima!ed !ons 6,000,000 &'!ra"!ed in 200 500,000 Remaining !ons F 1@1@2009

),500,000

?e( deple!ion ra!e per uni! 5,50,000 @ ),500,000 .90

Deple!ion for 2009 1,000,000 ' .90 900,000

2. Cos! of buildings 2,000,000 Residual value 200,000 Depre"iable "os! 1,00,000

Depre"ia!ion ra!e per uni! 1,00,000 @ 4,000,000 .45

Depre"ia!ion for 200 500,000 ' .45 225,000

n !he absen"e of an s!a!emen! !o !he "on!rar, !he ou!pu! me!hod is used in"ompu!ing depre"ia!ion of mining e-uipmen!.

Depre"iable "os! 1,00,000Depre"ia!ion for 200 225,000Remaining depre"iable "os! 1,565,000#ddi!ional building in 2009 365,000

o!al depre"iable "os! F 1@1@2009 1,950,000

?e( depre"ia!ion ra!e per uni! 1,950,000 @ ),500,000.30

Depre"ia!ion for 2009 1,000,000 ' .30300,000

23Problem 1)-11

200) ?o deple!ion be"ause !here is no produ"!ion.

200, Pur"hase pri"e

2,000,000&s!ima!ed res!ora!ion "os!

2,000,000Developmen! "os! F 200

1,000,000Developmen! "os! F 2009

1,000,000 o!al "os!32,000,000



Residual value 5,000,000

Deple!able "os!26,000,000

Ra!e in 2009 26,000,000 @ 10,000,000

2.60

Deple!ion in 2009 3,000,000 ' 2.60,100,0002010 ons e'!ra"!ed in 20103,500,000

ons remaining in 12@31@20102,500,000

o!al es!ima!ed ou!pu! F 1@1@2010),000,000

?e( ra!e in 2010 26,000,000 F ,100,000@),000,0003.15

Deple!ion in 2010 3,500,000 ' 3.1511,025,000

Problem 1)-12 An&er B

#"-uisi!ion "os!2),400,000

Developmen! "os!3,)00,000&s!ima!ed res!ora!ion "os!1,00,000

o!al "os!31,00,000ess> Residual value3,000,000Deple!able "os!2,00,000

Ra!e per uni! 2,00,000 @ 1,200,00024

Deple!ion for 200 )0,000 ' 241,440,000

Problem 1)-13 An&er C

Deple!ion ra!e per uni! 9,200,000 @ 4,000,000 2.30

Problem 1)-1 An&er C

Ra!e per uni! 4),00,000 F 3,)00,000 @ 2,1)0,00020



Deple!ion in "os! of goods sold 240,000 ' 20 4,00,000

2

Problem 1)-1' An&er

#"-uisi!ion "os!10,000,000

ess> Residual value3,000,000Deple!able "os!6,000,000ess> #""umula!ed deple!ion F 12@31@2006

6,000,000 @ 10,000,000 K .60 ' 4,000,0002,00,000Remaining deple!able "os! F 1@1@2004,200,000?e( deple!ion ra!e 4,200,000 @ 6,500,000

.5)

Deple!ion for 200 1,500,000 ' .5)40,000

Problem 1)-16 An&er B

Deple!able "os!

33,000,000Deple!ion for 2006 33,000,000 @ 4,000,000 K .25 ' 200,000 1,)50,000Balan"e F 1@1@200

31,350,000

Produ"!ion in 200 225,000?e( es!ima!e F 12@31@2005,000,000?e( es!ima!e F 1@1@2005,225,000

Deple!ion for 200 31,350,000 @ 5,225,000 K ) ' 225,0001,350,000

Problem 1)-1(

;ue&tion 1 4 An&er A

Pur"hase pri"e14,000,000

ess> Residual value2,000,000Deple!able "os!

12,000,000



Deple!ion ra!e 12,000,000 @ 1,500,000 .00

Deple!ion for 200 150,000 ' 1,200,000

Produ"!ion 25,000 ' ) 150,000

;ue&tion 2 4 An&er C

Produ"!ion from <ul 1 !o De"ember 31, 200 25,000 ' )150,000 !ons#nnual produ"!ion 25,000 ' 12 300,000!ons&s!ima!ed life of mine 1,500,000 @ 300,0005 ears

%in"e !he life of !he mine is shor!er !han !he life of !he e-uipmen!, !he ou!pu! me!hod isused in "ompu!ing depre"ia!ion.

2'&-uipmen! ,000,000ess> Residual value 500,000Depre"iable "os! 6,500,000

Ra!e per uni! 6,500,000 @ 1,500,0005.00

Depre"ia!ion for 200 150,000 ' 5650,000

Problem 1)-1) An&er C

Pur"hase pri"e 9,000,000Developmen! "os!s in 2006 300,000

o!al "os! 9,300,000Residual value 1,200,000Deple!able "os! ,100,000

Ra!e in 2006 ,100,000 @ 2,000,0004.05

Deple!ion for 2006 200,000 ' 4.0510,000

Deple!able "os! ,100,000Deple!ion in 2006

10,000Balan"e6,290,000Developmen! "os!s in 200135,000



Deple!able "os! in 2006,425,000

Ra!e in 200 6,425,000 @ 1,)50,0004.50

Deple!ion for 200 300,000 ' 4.501,350,000

26

CHAPTER 1,

Problem 1,-1

1. C ). B2. B 6. C3. D . #4. C 9. B5. C 10. #

Problem 1,-2

1. #ppre"ia!ion 6,200,000 F 4,500,000 2,600,000

2. Boo+ value 4,500,000 F 900,0003,)00,000

3. Depre"ia!ed repla"emen! "os! 6,200,000 ' 0E 5,6)0,000

4. Revalua!ion surplus 5,6)0,000 F 3,)00,000 2,1)0,000

Problem 1,-3



1. #nnual depre"ia!ion on "os! 650,000 @ 5 150,000

Hriginal life 3,000,000 @ 150,000 20ears

2. &-uipmen! 1,00,000

#""umula!ed depre"ia!ion 450,000 Revalua!ion surplus 1,350,000

3. Depre"ia!ion 4,00,000 @ 20 240,000 #""umula!ed depre"ia!ion 240,000

4. Revalua!ion surplus 90,000Re!ained earnings 1,350,000 @ 15 90,000

Problem 1,-

1. #nnual depre"ia!ion on "os! 9,000,000 @ 25 3)0,000

#ge of asse! 3,)00,000 @ 3)0,000 10ears

2. 7a"hiner ),000,000 #""umula!ed depre"ia!ion 40E ' ),000,000 2,400,000 Revalua!ion surplus 3,)00,000

3. Depre"ia!ion 9,000,000 @ 15 )00,000 #""umula!ed depre"ia!ion )00,000

2(

4. Revalua!ion surplus 240,000Re!ained earnings 3,)00,000 @ 15 240,000

Problem 1,-'

Proportional approach

1. Building 3,000,000#""umula!ed depre"ia!ion 650,000Revalua!ion surplus 2,250,000

2. Depre"ia!ion ,000,000 @ 40 or ),000,000 @ 30 200,000#""umula!ed depre"ia!ion 200,000

ross repla"emen! "os! ),000,000 @ 65E ,000,000

3. Revalua!ion surplus 65,000Re!ained earnings 2,250,000 @ 30 65,000

Elimination approach

1. #""umula!ed depre"ia!ion 1,250,000Building 1,250,000



Building ),000,000 F 3,650,000 2,250,000Revalua!ion surplus 2,250,000

2. Depre"ia!ion ),000,000 @ 30 200,000#""umula!ed depre"ia!ion 200,000

3. Revalua!ion surplus 65,000Re!ained earnings 65,000

Problem 1,-6

1. &-uipmen! 2,600,000#""umula!ed depre"ia!ion 500,000

Revalua!ion surplus 2,200,000

2. Depre"ia!ion 6,500,000 @ 10 650,000 #""umula!ed depre"ia!ion 650,000

3. Revalua!ion surplus 2,200,000 @ 10 220,000

Re!ained earnings 220,000

4. Cash ,000,000 #""umula!ed depre"ia!ion 2,250,000 &-uipmen! 9,200,000 ain on sale of e-uipmen! 1,050,000

2)

Revalua!ion surplus 2,200,000 8 220,000 1,90,000 Re!ained earnings 1,90,000

Problem 1,-(

1. Building 10,000,000#""umula!ed depre"ia!ion 4,000,000Revalua!ion surplus ),000,000

2. Depre"ia!ion 13,000,000 @ 5 2,)00,000#""umula!ed depre"ia!ion 2,)00,000

3. Revalua!ion surplus 1,200,000Re!ained earnings ),000,000 @ 5 1,200,000

Problem 1,-)

Repla#ement Co&t #o&t

Appre#iationBuilding 3,000,000 5,000,000 2,000,000#""umula!ed depre"ia!ion )00,000 1,000,000400,000

2,400,000 4,000,000 1,)00,000



#""umula!ed depre"ia!ion on "os! 3,000,000 ' 20E )00,000

ife of asse! 100E @ divided b 4E25 ears

Per"en! of a""umula!ed depre"ia!ion 5 ears @ 25 20E

ross repla"emen! "os! 4,000,000 @ 0E 5,000,000

#""umula!ed depre"ia!ion on repla"emen! "os! 5,000,000 ' 20E 1,000,000

a. %hould be en!r>

Building 2,000,000#""umula!ed depre"ia!ion 400,000Revalua!ion surplus 1,)00,000

b. Corre"!ing en!r>

Building 1,000,000 Re!ained earnings 1,000,000

#""umula!ed depre"ia!ion 400,000Revalua!ion surplus 1,)00,000

". Depre"ia!ion 4,000,000 @ 20 200,000#""umula!ed depre"ia!ion 200,000

2,

d. Revalua!ion surplus 0,000Re!ained earnings 1,)00,000 @ 20 0,000

Problem 1,-,

1. #""umula!ed depre"ia!ion 00,0007a"hiner 00,000

2. Re!ained earnings 400,000Revalua!ion surplus 400,000

Problem 1,-10

Repla#ementCo&t #o&t

Appre#iationand 5,000,000 10,000,000

5,000,000

Building 25,000,000 45,000,00020,000,000#""umula!ed depre"ia!ion



25,000,000 ' 3@25 3,000,00045,000,000 ' 3@25 ///////// 5,400,000

2,400,000 22,000,000 39,)00,000

16,)00,000

7a"hiner 10,000,000 15,000,000 5,000,000#""umula!ed depre"ia!ion10,000,000 ' 3@5 ),000,00015,000,000 ' 3@5 ////////// 9,000,0003,000,000

4,000,000 ),000,0002,000,000


Appre#iation&-uipmen! 3,000,000 4,200,000

1,200,000

#""umula!ed depre"ia!ion3,000,000 ' 3@10 900,0004,200,000 ' 3@10 ///////// 1,2)0,000 / 3)0,000

2,100,000 2,940,00040,000

a. and 5,000,000 Building 20,000,000 7a"hiner 5,000,000 &-uipmen! 1,200,000

#""umula!ed depre"ia!ion F building 2,400,000 #""umula!ed depre"ia!ion F ma"hiner 3,000,000 #""umula!ed depre"ia!ion F e-uipmen! 3)0,000

Revalua!ion surplus 25,440,000

b. Depre"ia!ion 5,220,000 #""umula!ed depre"ia!ion F building 1,00,000 #""umula!ed depre"ia!ion F ma"hiner 3,000,000 #""umula!ed depre"ia!ion F e-uipmen! 420,000

2'0 Building>

Cos! 22,000,000 @ 22 1,000,000#ppre"ia!ion 16,)00,000 @ 22 00,000 1,00,000

7a"hiner>Cos! 4,000,000 @ 2 2,000,000#ppre"ia!ion 2,000,000 @ 2 1,000,000 3,000,000

&-uipmen!>Cos! 2,100,000 @ 6 300,000#ppre"ia!ion 40,000 @ 6 120,000 420,000

o!al depre"ia!ion 5,220,000



". Revalua!ion surplus 1,920,000Re!ained earnings 00,000 J 1,000,000 J 120,0001,920,000

d. Proper!, plan! and e-uipmen! a! revalued amoun!s>

and 10,000,000 Building 45,000,000 7a"hiner 15,000,000 &-uipmen! 4,200,000 o!al 64,200,000 ess> #""umula!ed depre"ia!ion 20,0,000 ?e! "arring value53,320,000

he follo(ing dis"losure should be made in !he no!es !o *nan"ial s!a!emen!s>


and 5,000,000 10,000,000 Building 25,000,000 45,000,000 7a"hiner 10,000,000 15,000,000 &-uipmen! 3,000,000 4,200,000 o!al 43,000,000 64,200,000 #""umula!ed depre"ia!ion 13,200,000 20,0,000 ?e! "arring value 29,00,000 53,320,000

#+edule o A##umulated epre#iation


Building 4,000,000 6,200,000 7a"hiner ,000,000 12,000,000 &-uipmen! 1,200,000 1,)0,000

13,200,000 20,0,000

2'1Problem 1,-11 An&er B


Appre#iationBuilding 5,000,000 ,000,000 3,000,000#""umula!ed depre"ia!ion 1,250,000 2,000,000650,000

3,650,000 ),000,0002,250,000



Problem 1,-12 An&er B

ound Boo/ Revaluation value value

&urplu&

and 5,000,000 2,000,0003,000,000Building 65E ' 25,000,000 1,650,000 11,250,000

6,500,0007a"hiner 50E ' 5,000,000 2,500,000 1,500,0001,000,000

11,500,000

Problem 1,-13 An&er

$air value F De"ember 31, 200 450,000?e! boo+ value F De"ember 31, 200 302,500Revalua!ion surplus 142,500

Problem 1,-1

Nues!ion 1 An&er ANues!ion 2 An&er BNues!ion 3 An&er B

Problem 1,-1'

1. # ). # 11. #2. C 6. # 12. #3. B . D 13. #4. # 9. D 14. D

5. # 10. D 15. #

Problem 1,-16

1. mpairmen! loss 900,000#""umula!ed depre"ia!ion 900,000

Cos! 4,500,000 #""umula!ed depre"ia!ion 2,100,000 Boo+ value F <anuar 1 2,400,000 Re"overable value 1,500,000 mpairmen! loss 900,000

2. Depre"ia!ion 1,500,000 @ 3 500,000#""umula!ed depre"ia!ion 500,000

2'2

3. Cos! 4,500,000 #""umula!ed depre"ia!ion 2,100,000 J 900,000 J 500,000 3,500,000



Boo+ value F De"ember 31 1,000,000

Problem 1,-1(

1. mpairmen! loss 1,125,000#""umula!ed depre"ia!ion 1,125,000

Cos! F <anuar 1 2,500,000 #""umula!ed depre"ia!ion 2,500,000 F 500,000 @ ' 2500,000 Boo+ value F <anuar 1 2,000,000 Re"overable value 65,000 mpairmen! loss 1,125,000

2. Depre"ia!ion 365,000#""umula!ed depre"ia!ion 65,000 F 125,000 @ 2

365,0003. Cos! 2,500,000 #""umula!ed depre"ia!ion 500,000 J 1,125,000 J 365,000 2,000,000

Boo+ value F De"ember 31 500,000

Problem 1,-1)

1. HOer pri"e 25,000,000

Cos! of disman!ling and removal assumed b !he bidder 5,000,000 $air value less "os! !o sell 30,000,000

Presen! value of fu!ure "ash o(s33,000,000 ess> &s!ima!ed liabili! 5,000,000 Malue in use 2,000,000

Carring amoun! 39,000,000 ess> &s!ima!ed liabili! 5,000,000 #d;us!ed "arring amoun! 34,000,000 Re"overable amoun! F fair value less "os! !o sell, being !he higher amoun!30,000,000 mpairmen! loss 4,000,000

P#% 3), paragraph 6, provides !ha! !he fair value less "os! !o sell is e-ual !o !hees!ima!ed selling pri"e plus !he es!ima!ed liabili! assumed b !he buer.

he s!andard fur!her provides !ha! !o perform a meaningful "omparison be!(een !he"arring amoun! and re"overable amoun!, !he es!ima!ed liabili! assumed b !he buer

is dedu"!ed in de!ermining bo!h !he value in use and "arring amoun! of !he asse!.


2'3

Problem 1,-1,



1. <et #a&+ in=o& P> a#tor Pre&ent value200 1,000,000 .930

1),640,0002009 15,000,000 .56

12,55,000

2010 15,000,000 .69411,910,0002011 12,000,000 .635

,20,000 )0,000,000

o!al value in use 50,325,000

2. he re"overable amoun! is !he value in use of P50,325,000 be"ause !his is higher !han!he

fair value less "os! !o sell of P4,000,000.

3. mpairmen! loss 14,)65,000#""umula!ed depre"ia!ion )5,000,000 F 50,325,000 14,)65,000

4. Depre"ia!ion 12,51,250#""umula!ed depre"ia!ion 50,325,000 @ 4

12,51,250

Problem 1,-20

1. Depre"ia!ion 1,000,000#""umula!ed depre"ia!ion 10,000,000 @ 10 1,000,000

2. Depre"ia!ion 1,000,000#""umula!ed depre"ia!ion 1,000,000


4. Depre"ia!ion 650,000#""umula!ed depre"ia!ion ),000,000 @ 650,000

5. #""umula!ed depre"ia!ion 1,650,000ain on impairmen! re"over 1,650,000

Cos! F 1@1@200) 10,000,000#""umula!ed depre"ia!ion 10,000,000 @ 10 ' 2 2,000,000Boo+ value F 12@31@2006 ,000,000mpairmen! loss F 2006 2,000,000

#d;us!ed boo+ value F 12@31@2006 ),000,000Depre"ia!ion F 200 ),000,000 @ 650,000Boo+ value F 12@31@200 5,250,000

Cos! F 1@1@200) 10,000,000#""umula!ed depre"ia!ion 10,000,000 @ 10 ' 3 3,000,000Boo+ value F 12@31@200 assuming no impairmen!

6,000,000Re"orded boo+ value 5,250,000



ain on reversal of impairmen! 1,650,000

2'

he fair value or re"overable value of P6,500,000 "anno! e'"eed !he boo+ value !ha!

(ould have been de!ermined assuming no impairmen! is re"ognied.

Problem 1,-21

1. mpairmen! loss 5,000,000#""umula!ed depre"ia!ion 35,000,000 F 30,000,000 5,000,000

2. Depre"ia!ion ),000,000#""umula!ed depre"ia!ion 30,000,000 @ 5),000,000

Hbserve !ha! !he undis"oun!ed ne! "ash o(s from !he asse! amoun! !o P36,500,000for 5 ears. his amoun! is more !han !he boo+ value of !he ma"hiner. nder

#meri"an%!andard, no impairmen! loss should be re"ognied in !his "ase. Io(ever, under !heP#% 3), if !he re"overable amoun! is less !han "arring amoun!, an impairmen! loss is

re"ognied, regardless of !he amoun! of undis"oun!ed "ash o(s (he!her less !han ormore !han !he "arring amoun!. P#% 3) has !o!all re;e"!ed !he "on"ep! ofundis"oun!ed "ash o(s for impairmen! purposes.

Problem 1,-22

1. Malue in use 1,500,000 ' 5.)5 ,465,000

2. mpairmen! loss ,250,000#""mula!ed depre"ia!ion ,250,000

Buildings 25,000,000 #""umula!ed depre"ia!ion 22,500,000 @ 20 ' )),650,000 Boo+ value F 1@1@200 1,250,000 $air value F +ig+er t+an value in u&e 10,000,000 mpairmen! loss ,250,000

3. Depre"ia!ion 1,000,000#""umula!ed depre"ia!ion 10,000,000 @ 10 1,000,000

Problem 1,-23

1. Malue in use 00,000 ' 3.99 3,192,000

2. mpairmen! loss 30,000#""umula!ed depre"ia!ion 30,000

7a"hiner 5,000,000 #""umula!ed depre"ia!ion 1,500,000 Boo+ value F 1@1@200 3,500,000 Presen! value of "ash o(s F +ig+er t+an air value 3,192,000



mpairmen! loss 30,000

3. Depre"ia!ion )3,400#""umula!ed depre"ia!ion 3,192,000 @ 5 )3,400

2''

Problem 1,-2

1. o!al "arring amoun! 5,000,000 Malue in use 3,)00,000 mpairmen! loss 1,400,000

2. mpairmen! loss allo"a!ed !o good(ill 500,000 mpairmen! loss allo"a!ed !o !he o!her asse!s 900,000

1,400,000

Ghen an impairmen! loss is re"ognied for a "ash genera!ing uni!, !he loss is allo"a!ed !o !he asse!s of !he uni! in !he follo(ing order>

a. $irs!, !o !he goodill, if an.b. hen, !o all o!her asse!s of !he uni! prorata based on !heir "arring amoun!.

Carr%ing amount $ra#tion Lo&&

Building 2,000,000 20@45 400,000 nven!or 1,500,000 15@45 300,000

rademar+ 1,000,000 10@45 200,000 4,500,000 900,000

3. mpairmen! loss 1,400,000ood(ill 500,000#""umula!ed depre"ia!ion F building 400,000nven!or 300,000

rademar+ 200,000

Problem 1,-2'

1. Carring amoun! 1),000,000 Malue in use 11,000,000 mpairmen! loss 5,000,000

2. Allo#ation o impairment lo&&

Building @1) ' 5,000,000

2,500,000 &-uipmen! 4@1) ' 5,000,000 1,250,000 nven!or 4@1) ' 5,000,000 1,250,000

5,000,000

Hbserve !ha! af!er allo"a!ing !he P2,500,000 loss !o !he building, !he "arring amoun!of !he building (ould be P5,500,000 (hi"h is loer t+an i!s fair value of P),500,000.



#""ordingl, onl P1,500,000 loss is allo"a!ed !o !he building and !he balan"e of P1,000,000 is reallo"a!ed !o !he e-uipmen! and inven!or prora!a.

2'6

Building Euipment 9nventor%#llo"a!ed loss 2,500,000 1,250,000 1,250,000Reallo"a!ed loss 1,000,000 4@ ' 1,000,000 500,000 4@ ' 1,000,000 ///////// ///////// 500,000mpairmen! loss 1,500,000 1,650,000 1,650,000

3. mpairmen! loss 5,000,000#""umula!ed depre"ia!ion F building 1,500,000

#""umula!ed depre"ia!ion F e-uipmen! 1,650,000nven!or 1,650,000

Problem 1,-26

#ll nimar!:s s!ores are in diOeren! lo"a!ions and probabl have diOeren! "us!omerpro*le. %o al!hough %mar! is managed a! !he "orpora!e level, %mar! genera!es "ashino(s !ha! are largely independent from !hose of !he o!her nimar!:s s!ores. herefore,i! is li+el !ha! %mar! in i!self is a "ash genera!ing uni!.

Problem 1,-2(

! is li+el !ha! !he re"overable amoun! of an individual magaine !i!le "an be assessed.&ven !hough !he level of adver!ising in"ome for a !i!le is inuen"ed !o a "er!ain e'!en! b!he o!her !i!les in !he "us!omer segmen!, "ash ino(s from dire"! sales and adver!isingare identiable for ea"h !i!le. n addi!ion, de"isions !o abandon !i!les are made on anindividual basis.

#""ordingl, !he individual magaine !i!les genera!e "ash ino(s !ha! are largely independent from one ano!her and !herefore, each magazine title is a separa!e "ashgenera!ing uni!.

Problem 1,-2)

Case 1

1. # is separa!e "ash genera!ing uni! be"ause !here is an a"!ive mar+e! for #:s produ"!s.

2. #l!hough !here is an a"!ive mar+e! for !he produ"!s of B and C, "ash ino(s from Band

C depend on !he allo"a!ion of produ"!ion a"ross !(o "oun!ries. ! is unlikely !ha! "ash ino(s from B and C "an be de!ermined individually . herefore, B and C, !oge!her



should be !rea!ed as a "ash genera!ing uni!.

257

Case 2

a. # "anno! be !rea!ed as a separa!e "ash genera!ing uni! be"ause i!s "ash ino(sdepend on !he sales of !he *nal produ"! b B and C, sin"e !here is no a"!ive mar+e!for #:s produ"!.

b. #s a "onse-uen"e, #, B and C, !oge!her, and !herefore, 7a'imus Compan, as a

(hole, should be !rea!ed as !he larges! single "ash genera!ing uni!.

Problem 1,-2,

he primar purpose of !he building is !o serve as a corporate asset suppor!ing i!musCompan:s manufa"!uring opera!ions. herefore, !he building in i!self "anno! be"onsidered !o genera!e "ash ino(s !ha! are largel independen! of !he "ash ino(sfrom !he en!i! as a (hole. n !his "ase, !he "ash genera!ing uni! is i!mus Compan as a(hole.

he building is not held for inves!men!. hus, i! is no! appropria!e !o de!ermine !hevalue in use of !he building based on !he "ash ino(s of rela!ed ren!.

Problem 1,-30 An&er C

Cos!, <anuar 1, 200500,000#""umula!ed depre"ia!ion, De"ember 31, 2006 100,000 ' 3 300,000Boo+ value, De"ember 31, 2006 500,000Re"overable value 200,000mpairmen! loss 300,000

he loss is re"orded as follo(s>

mpairmen! loss 300,000#""umula!ed depre"ia!ion 300,000

Cos! 00,000#""umula!ed depre"ia!ion 300,000 J 300,000 )00,000Re"overable value, <anuar 1, 200200,000Depre"ia!ion for 200 200,000 @ 5 40,000Boo+ value, De"ember 31, 200 1)0,000




$rom #ugus! 31, 2005 !o 7a 31, 200 is a period of 33 mon!hs. hus, !he remaining lifeof !he ma"hine is 26 mon!hs, )0 mon!hs original life minus 33.

Depre"ia!ion for !he mon!h of <une 200 1,350,000 @ 26 mon!hs50,000

2')

Cos! 3,200,000#""umula!ed depre"ia!ion F 5@31@200 3,200,000 F 500,000 ' 33@)0 1,45,000Boo+ value F 5@31@200 1,615,000$air value 1,350,000mpairmen! loss 3)5,000


Cos! F <anuar 1, 2004 1,000,000#""umula!ed depre"ia!ion, De"ember 31, 2006 900,000 @ 10 ' 43)0,000Boo+ value, De"ember 31, 2006 )40,000Depre"ia!ion for 200 )40,000 F 40,000 @ 4150,000Boo+ value, De"ember 31, 200 490,000


Boo+ value, 1@1@2002,400,000

Depre"ia!ion for 200 1,)00,000 @ 4400,000Boo+ value, 12@31@200 2,000,000%ales pri"e8re"overable value )50,000mpairmen! loss 1,350,000


Depre"ia!ion for 200 10E ' 2,000,000 200,000

Cos! F 1@2@2004 2,000,000#""umula!ed depre"ia!ion 8 12@31@0 200,000 ' 5 1,000,000

Boo+ value812@31@200 1,000,000&s!ima!ed "os! of disposal 50,000mpairmen! loss 1,050,000

Problem 1,-3' An&er C



Cos! 2,000,000#""umula!ed depre"ia!ion F 1@1@200 2,000,000 F 100,000 @ 10 ' 2.5 465,000Boo+ value F 1@1@200 1,525,000$air value )00,000mpairmen! loss 925,000


Cos! F 12@31@20042,00,000#""umula!ed depre"ia!ion F @31@200 2,400,000 @ 9) mon!hs ' 441,100,000Boo+ value F @31@2001,600,000$air value1,500,000 mpairmen! loss200,000

2',

Problem 1,-3( An&er C

Carring value2,000,000

De"ommissioning "os! ,000,000#d;us!ed "arring value

20,000,000$air value less "os! !o sell F higher 20,000,000 less 1,000,000

19,000,000mpairmen! loss1,000,000

Malue in use2),000,000

De"ommissioning "os! ,000,000#d;us!ed value in use

1,000,000

Problem 1,-3) An&er C

Carring value F 12@31@2006 6,000,000Depre"ia!ion for 200 20E

1,400,000Carring value F 12@31@200 5,)00,000Carring value F 12@31@200 assuming no impairmen! 6,200,000Reversal of impairmen! loss 1,)00,000



260CHAPTER 20

Problem 20-1 Problem 20-2

1. D ). D 1. # ). B

2. C 6. # 2. # 6. B3. D . D 3. C . D4. # 9. D 4. D 9. D5. D 10. B 5. D 10. D

Problem 20-3

200) <an. 1 Pa!en! 255,000

Cash 255,000

De". 31 #mor!ia!ion of pa!en! 12,650 Pa!en! 255,000 @ 20 12,650

200,De". 31 #mor!ia!ion of pa!en! 12,650

Pa!en! 12,650

2010 <an. 5 egal e'pense 90,000

Cash 90,000



De". 31 #mor!ia!ion of pa!en! 12,650 Pa!en! 12,650

2011 <an. 1 Pa!en! 510,000

Cash 510,000

De". 31 #mor!ia!ion of pa!en! 42,650Pa!en! 42,650

Hn original "os! 12,650 Hn "ompe!ing pa!en! 510,000 @ 16 30,000

42,650

Problem 20-

200) Resear"h and developmen! e'pense 510,000Cash 510,000

2011 Pa!en! 620,000Cash 620,000

261

#mor!ia!ion of pa!en! 620,000 @ 1) 45,000Pa!en! 45,000

2012 Pa!en! 540,000 Cash 540,000

#mor!ia!ion of pa!en! 1,000 Pa!en! 1,000

Hn rela!ed pa!en! 45,000Hn "ompe!ing pa!en! 540,000 @ 15

3),000 1,000

Problem 20-'

200) Resear"h and developmen! e'pense 250,000Cash 250,000

200, Pa!en! )0,000

Cash )0,000

#mor!ia!ion of pa!en! ),000Pa!en! )0,000 @ 10 ),000

2010 Pa!en! )00,000 Cash )00,000



Hriginal "os! )0,000?e( pa!en! )00,000

o!al "os! ))0,000ess> #mor!ia!ion for 200 ),000Balan"e F <anuar 1, 2009 )54,000

#mor!ia!ion of pa!en! )54,000 @ 15 43,)00 Pa!en! 43,)00

2011 #mor!ia!ion of pa!en! 43,)00 Pa!en! 43,)00

Pa!en! (ri!!en oO 5)),00

Pa!en! 5)),00

Balan"e F 1@1@2010 )54,000ess> #mor!ia!ion

2010 43,)00

2011 43,)00 6,200namor!ied "os! 5)),00

262

Problem 20-6

1. Pa!en! 6,140,000Cash 6,140,000

2. #mor!ia!ion of pa!en! 46),000Pa!en! 6,140,000 @ 15 46),000

3. #mor!ia!ion of pa!en! 1),000Pa!en! 5,612,000 @ 6

1),000

4. #"-uisi!ion "os! 6,140,000 #mor!ia!ion for 2005, 200) and 2006 46),000 ' 3 1,42,000 Carring amoun! F 1@1@200 5,612,000 #mor!ia!ion for 200 1),000 Carring amoun! F 12@31@200 4,9),000

Problem 20-(

1. Pa!en! 900,000Cash 900,000

2. #mor!ia!ion of pa!en! 90,000Pa!en! 900,000 @ 10 90,000



3. Pa!en! (ri!!en oO 540,000Pa!en! 540,000

Cos! 900,000 #mor!ia!ion for 2005, 200), 2006 and 200 90,000 ' 43)0,000

Carring amoun! F 12@31@200 540,000

Problem 20-)

1. Pa!en! ),200,000Cash ),200,000

2. egal e'penses 450,000Cash 450,000

3. #mor!ia!ion of pa!en! 1,050,000Pa!en! 1,050,000

Q 1,200,000 @ 150,000 L 2,000,000 @ 5 400,000 3,000,000 @ ) 500,000

1,050,000

263Problem 20-,

1. Re!ained earnings 500,000Pa!en! 500,000

2. Pa!en! 510,000 Re!ained earnings 510,000

3. ?o ad;us!men!.

4. oss on damages 100,000 egal e'pense 30,000

#""rued liabili!ies 130,000

5. Pa!en! 24,500Re!ained earnings 24,500

#mor!ia!ion per boo+ 500,000 F 450,000 50,000

Corre"! amor!ia!ion for 2006 510,000 @ 20 25,500 Hveramor!ia!ion 24,500

). #mor!ia!ion of pa!en! 25,500Pa!en! 25,500

Problem 20-10

200) Coprigh! 25,000Cash 25,000



#mor!ia!ion of "oprigh! 150,000 Coprigh! 150,000

25,000 @ 95,000 K 3 per "op50,000 ' 3 K 150,000

200, #mor!ia!ion of "oprigh! 90,000Coprigh! 30,000 ' 3

90,000

Problem 20-11

1. Coprigh! 240,000Re!ained earnings 240,000

Cos! of "oprigh! 300,000 ess> #mor!ia!ion 300,000 @ 5 )0,000 Boo+ value 240,000

2. #mor!ia!ion of "oprigh! )0,000Coprigh! )0,000

26Problem 20-12

1. Coprigh! )20,000 Pa!en! 400,000

Re!ained earnings 1,020,000

Coprigh! 1 400,000

ess> #mor!ia!ion from 1@1@2004 !o 12@31@2006 400,000 @ 20 ' 40,000 Boo+ value 320,000

Coprigh! 2 3)0,000 ess> #mor!ia!ion from 6@1@2005 !o 12@31@2006 3)0,000 @ 15 ' 2.5 )0,000 Boo+ value 300,000

Pa!en! 500,000 ess> #mor!ia!ion for 200) and 2006 500,000 @ 10 ' 2100,000 Boo+ value 400,000

2. #mor!ia!ion of "oprigh! 20,000 J 24,000 44,000 #mor!ia!ion of pa!en! 50,000

Coprigh! 44,000Pa!en! 50,000

Problem 20-13

Boo/& o $ran#+i&ee



1. $ran"hise ),000,000Cash ),000,000

2. #mor!ia!ion of fran"hise 300,000$ran"hise ),000,000 @ 20 300,000

3. Cash 25,000,000%ales 25,000,000

4. $ran"hise fee e'pense 1,250,000Cash 25,000,000 ' 5E 1,250,000

Problem 20-1

Boo/& o $ran#+i&ee

1. $ran"hise 20,000,000Cash 5,000,000?o!e paable 15,000,000

2. ?o!e paable 15,000,000 @ 4 3,650,000 n!eres! e'pense 15,000,000 ' 10E 1,500,000

Cash 5,250,000

26'

3. here is no amor!ia!ion be"ause !he fran"hise is for an inde*ni!e period.

Problem 20-1'

Boo/& o $ran#+i&ee

1. $ran"hise 3,000,000 J 3,690,000 ),690,000 Dis"oun! on no!e paable 1,210,000

Cash 3,000,000?o!e paable 5,000,000

?o!e paable 5,000,000 Presen! value of no!e 1,000,000 ' 3.69

3,690,000 mplied in!eres! 1,210,000

2. #mor!ia!ion of fran"hise )69,000$ran"hise ),690,000 @ 10 )69,000

3. ?o!e paable 1,000,000Cash 1,000,000

4. n!eres! e'pense 10E ' 3,690,000 369,000Dis"oun! on no!e paable 369,000

Problem 20-16



Reuirement a

1. easehold improvemen! F building 5,000,000Cash 5,000,000

2. Ren! e'pense 50,000 ' 12 )00,000

Cash )00,000

3. Depre"ia!ion 5,000,000 @ 10 500,000#""umula!ed depre"ia!ion 500,000

Reuirement b

#""umula!ed depre"ia!ion 2,500,000oss on leasehold "an"ela!ion 2,500,000

easehold improvemen! F building 5,000,000

Problem 20-1(

1. Ren! e'pense 1,200,000 Prepaid ren! 1,200,000Cash 2,400,000

266

2. easehold 2,000,000Cash 2,000,000

3. easehold improvemen! 500,000Cash 500,000

4. #mor!ia!ion of leasehold 400,000easehold 2,000,000 @ 5 400,000

5. Depre"ia!ion 500,000 @ 5 100,000#""umula!ed depre"ia!ion 100,000

Problem 20-1)

1. easehold 1,000,000Cash 1,000,000

2. Ren! e'pense 150,000 ' 12 1,00,000

Cash 1,00,000


4. easehold improvemen! 100,000

Cash 100,000

5. #mor!ia!ion of leasehold 100,000



easehold 1,000,000 @ 10 100,000

). Depre"ia!ion )0,000#""umula!ed depre"ia!ion )0,000

400,000 @ 10

40,000 100,000 @ 5 20,000 )0,000

Problem 20-1,

1. Ren! e'pense )00,000Cash )00,000

2. easehold 100,000Cash 100,000

3. easehold improvemen! 200,000

Cash 200,000


26(

5. #mor!ia!ion of leasehold 20,000easehold 100,000 @ 5 20,000

). Depre"ia!ion 52,500#""umula!ed depre"ia!ion 52,500

200,000 @ 5 40,000 50,000 @ 4 12,500

52,500

Problem 20-20

1. #mor!ia!ion of pa!en! 20,000#""umula!ed amor!ia!ion 1,920,000 F 240,000 @ ) 20,000

2. rademar+ 00,000 ' 3@4 )00,000 ?on"ompe!i!ion agreemen! 200,000

Cash 00,000

3. #mor!ia!ion of non"ompe!i!ion agreemen! 40,000#""umula!ed amor!ia!ion 200,000 @ 5 40,000

4. Roal! e'pense 50,000Cash 50,000

Problem 20-21



1. #"-uisi!ion "os! 6,500,000 ?e! asse!s a"-uired 4,)00,000 ood(ill 2,900,000

2. Cash 50,000 #""oun!s re"eivable 00,000

nven!or 1,350,000 Proper!, plan! and e-uipmen! 4,300,000 ood(ill 2,900,000

#""oun!s paable 900,000?o!e paable F ban+ 1,000,000Cash 6,500,000

Problem 20-22

1. #"-uisi!ion "os! ),000,000 ?e! asse!s a"-uired a! fair value 3,300,000 ood(ill 2,600,000

o!al asse!s a! fair value 5,300,000 o!al liabili!ies 2,000,000 ?e! asse!s a"-uired a! fair value 3,300,000

26)

2. Cash 50,000 #""oun!s re"eivable 500,000 nven!or 1,500,000 Pa!en! 250,000 Proper!, plan! and e-uipmen! 3,000,000 ood(ill 2,600,000

#""oun!s paable 2,000,000

Cash ),000,000

Problem 20-23

1. Cash 1,000,000 nven!or 500,000 n8pro"ess R and D 5,000,000 o!al asse!s ),500,000 o!al liabili!ies 3,000,000 ?e! asse!s 3,500,000

#"-uisi!ion "os! ,000,000 ?e! asse!s a"-uired a! fair value 3,500,000

ood(ill 4,500,000

he good(ill in"ludes !he fair value of !he assembled (or+for"e of P1,200,000. he assembled (or+for"e is no! a""oun!ed for separa!el as an asse!.

2. Cash 1,000,000 nven!or 500,000 n pro"ess R and D 5,000,000 ood(ill 4,500,000



#""oun!s paable 2,)00,000?o!es paable 400,000Cash ,000,000

Problem 20-2

1. #verage earnings 250,000 Divide b 10E?e! asse!s in"luding good(ill 2,500,000

ess> ?e! asse!s before good(ill 1,600,000 ood(ill 00,000

2. #verage earnings 250,000 ess> ?ormal earnings E ' 1,600,00013),000 &'"ess earnings 114,000 Divide b 15E ood(ill 6)0,000

26,

3. #verage earnings 250,000 ess> ?ormal earnings 10E ' 1,600,000160,000 &'"ess earnings 0,000 7ul!ipl b 5 ood(ill 400,000

4. &'"ess earnings 0,0007ul!ipl b 5.)5

ood(ill 452,000

Problem 20-2'

#verage earnings or prior ears 1,500,000 @ 3 500,000n"rease in average earnings 10E ' 500,000 50,000

o!al 550,000ess> Pa!en! amor!ia!ion 500,000 @ 5 ears100,000&arnings for good(ill "ompu!a!ion 450,000

a. #verage fu!ure earnings 450,000 Divide b E ?e! asse!s in"luding good(ill 5,)25,000 ess> ?e! asse!s e'"luding good(ill 5,000,000 ood(ill )25,000

b. #verage earnings 450,000 ess> ?ormal earnings E ' 5,000,000 400,000 #verage e'"ess earnings 50,000



Divide b 10E ood(ill 500,000 ". ood(ill 50,000 ' 3.16 15,500

Problem 20-26

a. #verage earnings 650,000 &'pe"!ed in"rease 1,000,000 F 900,000100,000 o!al 50,000 ess> ?ormal earnings 4,00,000 ' 10E40,000 &'"ess earnings 360,000

ood(ill 360,000 ' 4 1,40,000

%hareholders: e-ui! per boo+ 5,000,000 ess> Re"orded good(ill 200,000

?e! asse!s before good(ill 4,00,000

b. ood(ill 360,000 @ 20E 1,50,000

2(0

Problem 20-2(

1. %hare "api!al 2,000,000 Re!ained earnings 1,500,000 o!al shareholders: e-ui!

3,500,000 ess> Re"orded good(ill 1,000,000 ?e! asse!s before good(ill 2,500,000

#verage earnings 1,200,000 J 150,000 @ 3 450,000 ess> ?ormal earnings 10E ' 2,500,000250,000 &'"ess earnings 200,000 Divide b 1)E ood(ill 1,250,000

2. ?e! asse!s before good(ill 2,500,000 ood(ill 1,250,000

Pur"hase pri"e 3,650,000

Problem 20-2)

1. Malue in use 3,000,000 ?e! asse!s in"luding good(ill a! "arring amoun! 42,000,000 mpairmen! loss 4,000,000



2. mpairmen! loss 4,000,000ood(ill 4,000,000

Problem 20-2,

1. Malue in use )0,000,000

?e! asse!s in"luding good(ill a! "arring amoun! 65,000,000 mpairmen! loss15,000,000

2. mpairmen! loss 15,000,000ood(ill 5,000,000#""oun!s re"eivable 2,000,000nven!or 3,000,000#""umula!ed depre"ia!ion 5,000,000

he remaining impairmen! loss of P10,000,000, af!er dedu"!ing !he lossappli"able !o good(ill, is allo"a!ed !o !he o!her non"ash asse!s on aprora!a basis.

Problem 20-30

1. Presen! value of inde*ni!e "ash o(s 200,000 @ 10E2,000,000

rademar+ ),000,000 mpairmen! loss 4,000,000

2(1

Presen! value of "ash o(s from "ash genera!ing uni! 9,000,000 ' .51

6),590,000 ?e! asse!s in"luding good(ill a! "arring amoun! 0,000,000 mpairmen! loss 3,410,000

2. mpairmen! loss 6,410,000 rademar+ 4,000,000ood(ill 3,410,000

Problem 20-31

1. o!al "arring amoun! 5,000,000 Malue in use 4,230,000 mpairmen! loss 660,000

2. mpairmen! loss 660,000ood(ill 500,000#""umula!ed depre"ia!ion F building 25@45 ' 260,000 150,000nven!or 15@45 ' 260,000 90,000

rademar+ 5@45 ' 260,000 30,000

Problem 20-32



12@31@200 R and D e'pense 2,500,000Cash 2,500,000

1@1@2009 R and D e'pense 1,200,000Cash 1,200,000

6@1@2009 R and D e'pense 500,000Cash 500,000

11@1@2009 Pa!en! 350,000Cash 350,000

11@15@2009 Pa!en! 00,000Cash 00,000

12@31@2009 Pa!en! 100,000Cash 100,000

Problem 20-33

1. Produ"! "os!s (hi"h are asso"ia!ed (i! inven!or i!ems are>

Dupli"a!ion of "ompu!er sof!(are and !raining ma!erials 2,500,000 Pa"+aging produ"! 900,000 o!al inven!or 3,400,000

2. he "os!s in"urred from !he !ime of !e"hnologi"al feasibili! !o !he !ime (henprodu"! "os!s are in"urred should be capitalized as "ompu!er sof!(are "os!.

2(2

H!her "oding "os!s af!er es!ablishmen! of !e"hnologi"al feasibili! 2,400,000H!her !es!ing "os!s af!er es!ablishmen! of !e"hnologi"al feasibili! 2,000,000

Cos!s of produ"ing produ"! mas!ers for !raining ma!erials 1,500,000 o!al "os!s !o be "api!alied 5,900,000

3. Comple!ion of de!ail program design 1,300,000 Cos! in"urred for "oding and !es!ing !o es!ablish !e"hnologi"al feasibili! 1,000,000 o!al "os!s "harged as e'pense 2,300,000

Problem 20-3

1. Designing and planning 1,000,000 Code developmen! 1,500,000 es!ing //500,000

o!al R and D e'pense in 200 3,000,000

he "os! of produ"ing !he produ"! mas!er of P2,500,000 is "api!alied assof!(are "os! !o be subse-uen!l amor!ied.

2. Cos! of produ"ing !he sof!(are program in 2009 1,000,000 #mor!ia!ion of sof!(are "os! 2,500,000 @ 4 )25,000 o!al e'pense in 2009 1,)25,000



Problem 20-3' An&er C

Cos! 356,000#""umula!ed amor!ia!ion from 2005 !o 2006 356,000 @ 15 ' 361,400

Boo+ value F 12@31@2006 25,)00#mor!ia!ion for 200 25,)00 @ 6 40,00Boo+ value F 12@31@200 244,00


Cos! 1@1@2003 ),000,000#""umula!ed depre"ia!ion F 12@31@2006 ),000,000 @ 15 ' 5 2,000,000Boo+ value F 1@1@200 4,000,000

#mor!ia!ion for 200 4,000,000 @ 500,000

Problem 20-3( An&er C

Cumula!ive earnings 550,000ess> ain on sale 50,000#d;us!ed "umula!ive earnings 500,000

2(3

#verage earnings 500,000 @ 5 100,000Divide b "api!alia!ion ra!e 10E?e! asse!s in"luding good(ill

1,000,000ess> ?e! asse!s before good(ill 650,000ood(ill 250,000

Problem 20-3) An&er C

?e! asse!s 1,00,0007ul!ipl b e'"ess ra!e 1)E minus 10E )E&'"ess earnings 10,0007ul!ipl b presen! value fa"!or 3.26ood(ill 353,1)0

Problem 20-3, An&er

Pur"hase pri"e 5,000,000ess> ood(ill500,000?e! asse!s before good(ill 4,500,000



&s!ima!ed annual earnings s-ueee 550,000ess> ?ormal earnings 4,500,000 ' 10E 450,000&'"ess or superior earnings 100,000Divide b "api!alia!ion ra!e 20Eood(ill 500,000


#""oun!s re"eivable 2,000,000nven!or 500,000&-uipmen! 500,000%hor!8!erm paable 2,000,000?e! asse!s a! fair value 1,000,000

#"-uisi!ion "os! 5,000,000?e! asse!s a! fair value 1,000,000ood(ill 4,000,000



Do(npamen! 2,000,000Presen! value of annual pamen! for 4 ears 1,000,000 ' 2.91 2,910,000Cos! of fran"hise 4,910,000

2(


Design "os!s 1,500,000egal fees of regis!ering !rademar+ 150,000Regis!ra!ion fee (i!h Pa!en! HA"e 50,000

o!al "os! of !rademar+ 1,600,000

Problem 20- An&er B

Hriginal lease 12 ears&'!ension

o!al life 20ess> Lears e'pired 200) and 2006 2

Remaining life 1ears

ife of improvemen! shor!er 15ears

easehold improvemen! 540,000ess> Depre"ia!ion for 200 540,000 @ 15 3),000Boo+ value 504,000



Problem 20-' An&er

Depre"ia!ion 3,)00,000 @ ) )00,000


Depre"ia!ion of e-uipmen! 135,0007a!erials used 200,000Compensa!ion "os!s of personnel 500,000Hu!side "onsul!ing fees 150,000ndire"! "os!s allo"a!ed 250,000

1,235,000

Problem 20-( An&er A

7odi*"a!ion !o !he formula!ion of a "hemi"al produ"! 135,000Design of !ools, ;igs, molds and dies160,000abora!or resear"h 215,000

o!al resear"h and developmen! e'pense 520,000

Problem 20-) An&er

#ll "os!s are "harged !o R and D e'pense.

2('

Problem 20-, An&er A

rademar+ 3,000,000Malue in use 120,000 @ )E 2,000,000mpairmen! loss 1,000,000

Pa!en! 2,000,000#mor!ia!ion for 200 2,000,000 @ 5400,000Boo+ value F 12@31@200 1,)00,000Malue in use 500,000 ' 3.46

1,635,000mpairmen! loss 8/ /

Problem 20-'0 An&er B

Carring amoun! of ne! asse!s 1),000,000Malue in use ,000,000 ' 1.512,000,000mpairmen! loss F appli"able !o good(ill 4,000,000

financial accounting chapter 16 - 20

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