BA 123 PPE Assignment I.
Gabaldon Gabaldon Company Company’s ’s property, property, plant and equipment equipment and and aumu aumulated lated depreiation balanes at !eember 31, 2""# 2"" # are$ Aumulated Cost !epreiation %a&inery and equipment P1,3'",""" P3(),*"" Automobiles and tru+s 21",""" 1 1 ,3 2 ( -ease&old improements 32,""" 1 " ' ," " " Depreciation policy: a. !epreiation met&ods and use/ul lies$ %a&inery and equipment 0 straig&t line 1" years Automobiles and tru+s 0 1*" delining balane * years, all ere aquired a/ter 2""* -ease&old improements 0 straig&t line • •
•
b. !epreiation is omputed to t&e nearest mont&. . 4alage alues are immaterial e5ept /or automobiles and tru+s &i& &ae estimated salage alues equal to 1* o/ ost. Additional information: a. Gabaldon Gabaldon entered entered into a 126year 126year operating operating lease starting starting 7anuary 7anuary 1, 2""). 2""). 8&e lease&old improements ere ompleted on !eember 31, 2""( and t&e /aility as oupied on 7anuary 1, 2""). b. 9n 7uly 1, 1, 2"1", ma&inery ma&inery and and equipment equipment ere ere pur&ased pur&ased at a total total inoie inoie ost o/ P32*,""". Installation ost o/ P,""" as inurred. . 9n August August 3", 2"1", 2"1", Gabaldo Gabaldon n pur&ase pur&ased d ne automobil automobile e /or P2*,""". P2*,""". d. 9n 4eptember 4eptember 3", 2"1", 2"1", a tru+ tru+ it& a ost ost o/ P',""" P',""" and a arrying arrying amount amount P3",""" on !eember 31,2""# as sold /or P23,*"". e. 9n !eember !eember 2", 2"1", 2"1", a ma&ine ma&ine it& a ost ost o/ P1),""", P1),""", a arrying arrying amount amount o/ P2,#)* on date o/ disposition, as sold /or P""". QUESTIONS: Based on t&e aboe and t&e result o/ your audit, anser t&e /olloing$ 1. 8&e gain on sale o/ tru+ on 4eptember 3" is 2. 8&e gain on sale o/ ma&inery on !eember 2", 2"1" is 3. 8&e ad:usted balane o/ t&e property, plant and equipment as o/ !eember 31, 2"1" is . 8&e total depreiation e5pense /or t&e year ended !eember 31, 2"1" is *. 8&e arrying amount o/ t&e property, plant and equipment as o/ !eember 31, 2"1" is
II. ;A
t onstrution !r. )2,""" Analysis of the details in the account disclosed the following: a?. 8&e old equipment, &i& as remoed be/ore t&e installation o/ t&e ne one, &ad been /ully depreiated. b?. Cas& disounts reeied on t&e payments /or materials used in onstrution totalling P #,""" ere reported in t&e pur&ase disount aount ?. 8&e /atory oer&ead aount s&os a balane o/ P ')(,""" /or t&e year ended !eember 31, 2"12 t&is balane e5eeds normal oer&ead on regular plant atiities by appro5imately P *",)"" and is attributable to equipment transation. d?. A pro>t as reogni@ed on onstrution /or t&e dierene beteen osts inurred and t&e prie at &i& t&e equipment ould &ae been pur&ased. e?. &ile testing t&e equipment, sample items ere produed. 8&ese ere sold /or P *,""" &i& as redited to misellaneous reenue. uestions$ 1. &at is t&e total ost o/ t&e equipmentD 2. Assuming nominal amounts are still open, prepare indiidual orreting entries. III. B% Company aquired t&e assets o/ a ompetitor in order to establis& a bran& o/ B%’s main store. B% paid P*"",""" in as& and issued 1",""" ordinary s&ares &i& &ad a P2* par alue and a P3" mar+et alue at t&e date o/ issuane. 8&e mar+et alue is based on atie trading o/ t&e s&ares in quantities /ar in e5ess o/ t&e 1",""" s&ares e5&anged in t&e aquisition. An appraisal o/ t&e assets, used by B% to negotiate t&e pur&ase prie, reeals t&e /olloing alues on t&e transation date$ Inentory P2"", """ A< 1"",""" !isplay >5tures 1"",""" Building 3"",""" -and 1"",""" An ine5periened boo++eeper /or B% reorded t&e aquisition as / ollos$ Inentory 2"",""" A< 1"",""" i5ed Assets *",""" Cas& *"",""" 9rdinary s&ares 2*",""" F1",""" s&ares P2*?
A /urt&er analysis o/ i5ed Asset aount reeals t&at t&e same boo++eeper entered t&e /olloing items in t&e aount during 2"12$ !ebit entries %ay 1 Aquisition prie %ay 1 Insurane on building and >5tures P(",""" F%ay 1, 2"12 to April 3", 2"13? Credit entries %ay 1 Proeeds /rom sale o/ unneeded display >5tures !e 31 !epreiation /or 2"12 F3#,(2*? Balane, !eember 31, 2"12 P2",3)*
P*",""" 1","""
P1),*"" 2212*
A omputation aompanying depreiation >gure /or 2"12 is as /ollos$ FP(","""6P1)*""?H 2" years P22,12*. Jou &ae determined t&at t&e unneeded display >5tures t&at ere sold represent 1" o/ t&e >5tures aquired /rom t&e ompetitor on %ay 1. Jou &ae also learned t&at B% depreiates >5tures oer a 1"6year li/e by t&e sum6o/6t&e6years’6digits met&od and assumes a salage alue o/ 1" o/ t&e ost o/ items on &and &en t&e depreiation alulation is made. 8&e building is sub:et to straig&t6line depreiation oer a 2"6year li/e. 8&e building &as an estimated P*",""" residual alue at t&e end o/ 2" years. All depreiation is omputed to t&e nearest /ull mont&. 8&is in/ormation as apparently ignored by t&e boo++eeper. Instrutions$ a. Prepare :ournal entries to orret t&e aounts on !eember 31, 2"12, assuming t&e boo+s &ae not been losed. b. Prepare balane s&eet /or PPE on !eember 31, 2"12. . !etermine t&e appropriate depreiation e5pense amounts /or t&e display >5tures and building /or 2"13. IK. 4abrina %anu/aturing Company &ad seeral transations during 2"11 and 2"12 onerning plant assets. 4eeral o/ t&ese transations are desribed belo, /olloed by t&e entries made by t&e ompany’s aountant.
Equipment. 4eeral used items ere aquired on ebruary 1, 2"11, by issuing a P 1"",""" noninterest6bearing note. 8&e note is due one year /rom date o/ issuane. =o mar+et alue o/ t&e note or t&e equipment is aailable. 4abrina’s most reent borroing rate is '. eb, 1, 2"11 Equipment =otes Payable !e. 31, 2"11 !epreiation e5pense A. !ep.6 Equipment
1"",""" 1"",""" 1",""" 1","""
Buildings. A building as aquired on 7une 1, 2"11 by issuing 1"",""" s&ares o/ t&e ompany’s P * par alue ordinary s&ares. 8&e ordinary s&are is not idely traded, t&ere/ore no mar+et prie is aailable. 8&e building as appraised on t&e transation date at P (*",""".
7une 1, 2"11 Building 9rdinary 4&are !e, 31, 2"11
*"","""
!epreiation E5pense A. !ep.6 Building
*"",""" 2",""" 2","""
Inventory/Fixtures. Inentory and display >5tures ere aquired /or P 12*,""" as& on April 1, 2"12, /rom a ompetitor &o as liquidating &er business. 8&e estimated alue o/ t&e inentory as P '*,""" and t&e alue o/ t&e >5tures as P **,""". April 1, 2"12 Inentory '*,""" !isplay i5tures **,""" Cas& Gain on aquisition o/ Inentory L >5tures
12*,""" 1*,"""
Land. -and as donated to 4abrina by t&e City o/ Cagayan in 4eptember 2"12 as an induement to build a /aility t&ere. Plans all /or onstrution at an undetermined /uture date. 8&e land as appraised at P ', *"". =o entry as made. Machinery. %a&inery as aquired an e5&ange /or similar equipment on 9tober 12, and ere appraised at P *,""" on t&e date o/ t&e e5&ange. 4abrina reeied ma&inery alued at P ",""" and P *,""" in as& in t&e transation, 9tober 12, 2"11
%a&inery ",""" Cas& *,""" A. !ep.6 %a&inery 1(,""" %a&inery *2,*"" Gain on e5&ange o/ ma&inery ',*""
!eember 31, 2"11
!epreiation E5pense A. !ep.6 %a&inery
,""" ,"""
Additional In/ormation$ 4abrina uses straig&t line depreiation, applied to all assets as /ollos$ 1. A /ull year’s depreiation ta+en in t&e year o/ aquisition and no depreiation ta+en in t&e year o/ disposal. 2. Estimated li/e$ 2.* years /or building 1" years on all ot&er assets. F=o salage alues are assumed? Instrutions$ or ea& o/ t&e items o/ PPE aboe$ a. !esribe t&e errorFs? made in reording t&e assets and related depreiation, i/ any. b. Prepare :ournal entries to orret t&e aounts and to properly reord depreiation /or 2"12. 8&e boo+s /or 2"12 &ae not been ad:usted or losed. K. At !eember 31, 2""3, 4pener Corporation’s nonurrent operating asset and aumulated depreiation aounts &ad balanes as /ollos$
Category -and Buildings %a&inery and Equipment Automobiles and 8ru+s -ease&old Improements
Category Buildings %a&inery and Equipment Automobiles and 8ru+s -ease&old Improements -and Improements
Cost of sset
cc. !epreciation
P*,2"",""" ',""",""" 31,""","""
P1",(1(,""" ),'',"""
*,2'",""" ','","""
3,',""" ,2","""
!eprecation Method 1*" delining balane 4traig&t6line
"seful Life 2* years 1" years
1*" delining balane 4traig&t6line 4traig&t6line
* years ' years 12 years
!epreiation is omputed to t&e nearest mont&. 8&e salage alues o/ t&e depreiable assets are immaterial.
8ransations during 2"" and ot&er in/ormation are as /ollos$
1. 9n 7anuary (, 2"", a plant /aility onsisting o/ land and a building as aquired /rom 8oby Company /or P2,""",""". 9/ t&is amount, 2" as alloated to land. 2. 9n April 3, 2"", ne par+ing lots, streets and sideal+s at t&e aquired plant /aility ere ompleted at a total ost o/ P),('",""". 8&ese e5penditures &ae an estimated use/ul li/e o/ 12 years. 3. 8&e lease&old improements ere ompleted on !eember 31, 2""", and &ad an estimated use/ul li/e o/ eig&t years. 8&e related lease, &i& ould &ae terminated on !eember 31, 2""(, as reneable /or an additional /our6year term. 9n April 2', 2"", 4pener e5erised t&e reneal option. . 9n 7uly 1, 2"", ma&inery and equipment ere pur&ased at a total inoie ost o/ P1",""",""". Additional osts o/ P"",""" /or deliery and P1,2"",""" /or installation ere inurred. *. 9n August 2#, 2"", 4pener pur&ased ne automobile /or P("",""". (. 9n 4eptember 3", 2"", a tru+ it& a ost o/ P#(",""" and a arrying amount o/ P32,""" on t&e date o/ sale as sold /or P(",""". !epreiation /or t&e nine mont&s ended 4eptember 3", 2"" as P#,"'". ). 9n !eember 21, 2"", a ma&ine it& a ost o/ P('",""" and a arrying amount o/ P11#,""" at t&e date o/ disposition as srapped it&out as& reoery.
Cost #$/%#/$&&% dditions -and Buildings %a&inery and Equipment Automobiles and 8ru+s -ease&old Improements
Buildings %a&inery and Equipment Automobiles and 8ru+s -ease&old Improements
!eductio ns
#$/%#/$& &'
P*,2"",""" ',""",""" 31,""",""" *,2'",""" ','","""
ccumulated !epreciation #$/%#/$&&% dditions !eductio ns P1",(1(,""" ),'',""" 3,',""" ,2","""
#$/%#/$& &'