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    Module 2 Answer Key On Property Plant and Equipment

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    Loven Boado
    The document provides examples and solutions for various accounting problems relating to property, plant and equipment. It addresses topics like accounting for machinery purchases and sales, determining costs of buildings and equipment, calculating depreciation expense, and applying concepts like capitalization of borrowing costs. The document contains detailed journal entries and calculations for analyzing different property, plant and equipment transactions and compliance with accounting standards.

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    Module 2 Answer Key On Property Plant and Equipment

    Uploaded by

    Loven Boado
    296 views7 pages
    The document provides examples and solutions for various accounting problems relating to property, plant and equipment. It addresses topics like accounting for machinery purchases and sales, determining costs of buildings and equipment, calculating depreciation expense, and applying concepts like capitalization of borrowing costs. The document contains detailed journal entries and calculations for analyzing different property, plant and equipment transactions and compliance with accounting standards.

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    PPE

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    Module-2-Answer-Key-on-Property-Plant-and-Equipment

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    The document provides examples and solutions for various accounting problems relating to property, plant and equipment. It addresses topics like accounting for machinery purchases and sales, determining costs of buildings and equipment, calculating depreciation expense, and applying concepts like capitalization of borrowing costs. The document contains detailed journal entries and calculations for analyzing different property, plant and equipment transactions and compliance with accounting standards.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    296 views7 pages

    Module 2 Answer Key On Property Plant and Equipment

    Uploaded by

    Loven Boado
    The document provides examples and solutions for various accounting problems relating to property, plant and equipment. It addresses topics like accounting for machinery purchases and sales, determining costs of buildings and equipment, calculating depreciation expense, and applying concepts like capitalization of borrowing costs. The document contains detailed journal entries and calculations for analyzing different property, plant and equipment transactions and compliance with accounting standards.

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    © All Rights Reserved
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    of 7

    AC10&11.2.

    2 Module 2
    ANSWER KEY ON PEROPERTY, PLANT AND EQUIPMENT - ASSESSMENT
    1. NAGA SIREN INC.s
    Jan. 2 Machinery 300,000
    2. Accounts payable 294,000
    Cash 6,000
    Jan 5 Machinery 5,500,000
    Share capital 5,000,000
    Share premium/APIC 500,000
    Jan. 6 Land (Php5.5M x 2/5) 2,200,000
    Building (Php5.5M x 3/5) 3,300,000
    Cash 5,500,000
    Jan. 7 Equipment 6,000,000
    Discount on note payable 1,000,000
    Cash 2,000,000
    Notes payable 5,000,000
    Jan. 9 Furniture and fixtures 1,360,000*
    Discount on note payable 640,000
    Notes payable 2,000,000
    * (2M x 0.68)
    Jan. 10 Delivery equipment - new 500,000
    Accumulated depreciation 2,000,000
    Delivery equipment - old 2,400,000
    Gain on exchange 100,000
    RIKIMARU INC.
    A. With commercial substance
    1. Fair value of the asset given 1,200,000
    Add: Cash payment 200,000
    Cost of the machinery 1,400,000

    2. Fair value of the asset given 1,200,000


    Less: Carrying amount (800,000)
    Gain on exchange 400,000

    B. Without commercial substance

    1. Carrying of the asset given 800,000


    Add: Cash payment 200,000
    Cost of the machinery 1,000,000

    2. NIL. The transaction lacks commercial substance, thus no gain or loss on


    exchange will be recorded.

    3. NYX CO.
    Purchase price including VAT (1,568,000/1.12) 1,400,000
    Cost of water device to keep the machine cool 8,000
    Cost of safety rails and platforms surrounding machinery 12,000
    Installation costs 20,000
    Fees paid to consultants for advice on acquisition of the machinery 13,000
    Present value of the estimated dismantling cost if the new machine 10,000
    Other nonrefundable sales tax 13,000
    Total cost of the machinery 1,476,000

    4. GYROCOPTER INC.
    5. INVOKER CORP.

    GROSS METHOD NET METHOD


    2021
    Jan. 1 Building 12,000,000 Jan. 1 Building 12,000,000
    Cash 12,000,000 Cash 12,000,000

    Cash 1,000,000 Cash 1,000,000


    Deferred grant income 1,000,000 Building 1,000,000

    Dec. 31 Depreciation 2,400,000 Dec. 31 Depreciation 2,200,000


    Accumulated depreciation 2,400,000 Accumulated depreciation 2,200,000
    (12,000,000/5 years) (11,000,000/5 years)

    Deferred grant income 200,000


    Grant income 200,000
    (1,000,000/5 years)

    2022 2022
    Jan. 1 Deferred grant income 800,000 Jan. 1 Building 1,000,000
    Loss on government grant 200,000 Cash 1,000,000
    Cash 1,000,000

    Dec. 31 Depreciation 2,400,000 Dec. 31 Depreciation 1,400,000


    Accumulated depreciation 2,400,000 Accumulated depreciation 1,400,000

    Original carrying amount 2,200,000


    Increased carrying amount
    (1,000,000/5 x 2) 400,000
    Total depreciation 2,600,000

    6. PANGOLIER CORP.
    Average expenditures incurred evenly (30,000,000/2) 15,000,000
    Applicable to specific borrowing (10,000,000)
    Applicable to general borrowing 5,000,000
    Principal Interest
    12% 10-year bonds 30,000,000 3,600,000
    8% 5-year note 10,000,000 800,000
    Total general borrowing 40,000,000 4,400,000
    Average capitalization rate (4,400,000/40,000,000) 11%
    Interest on specific borrowing (10% x 10,000,000) 1,000,000
    Investment income ( 100,000) 900,000
    Interest on general borrowing (11% x 5,000,000) 550,000
    Average/avoidable cost 1,450,000 LOWER
    Actual borrowing cost (1,000,000 + 4,400,000) 5,400,000

    Interest expense for 2021 (4,400,000 – 550,000) 3,850,000


    There is no interest expense for specific borrowing because it is already capitalized by
    entry:
    Building 900,000
    Interest receivable 100,000
    Interest payable 1,000,000
    7. MORPHLING TECH.

    9/12) 750,000
    3/12) + (3M x 4/15 x 9/12) 850.000

    1,320,000
    850.000
    1,320,000
    850.000
    8. IO CORP.

    immovable equipment

    9. ABADDON LTD.
    10. HOODWINK CORP.

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