210 CHAPTER 16 Problem 16-1 1. 2. 3. 4. 5.
C D D D B
Problem 16-2 Cash paid for land and old building Removal of old building Pamen! amen! !o !enan! !enan!s s of old buildin building g !o va"a!e va"a!e premi premises ses #r"hi!e"! fee Building permi! $ee for !i!le sear"h %urve before "ons!ru"!ion &'"ava!ion Cos! of ne( building "ons!ru"!ed #ssessmen! fee Cos! of grading, leveling and land*ll Drive(as and (al+s emporar emporar -uar!ers for "ons!ru"!ion "re( emporar emporar building !o house !ools and ma!erials Cos! of "ons!ru"!ion "hanges
Land 1,000,000 50,000 15,000 15,000
Building
200,000 30,000 10,000 20,000 100,000 ),000,000 5,000 45,000
///////// 1,145,000
40,000 0,000 )0,000 50,000 ),5)0,000
!rea!ed as e'pense. Note: he "os! of repla"ing (indo(s is !rea!ed Problem 16-3 Land L an d improvement Cos! of land egal fees Pamen! of mor!gage Pamen! of !a'es Cos! of raing building Pro"eeds Pro"eeds from sale of ma!erials rading and drainage #r"hi!e"! fee Pamen! !o "on!ra"!or n!eres! "os! Drive(a and par+ing lo! Cos! of !rees, shrubs and o!her lands"aping Cos! of ins!alling ligh!s in par+ing lo! Premium for insuran"e
Building
2,000,000 10,000 50,000 20,000 30,000 5,000 15,000 200,000 ,000,000 300,000
/////// 2,12 2,120, 0,00 000 0
25,000 ,52 ,525, 5,00 000 0
40,000 55,000 5,000 /////// 100, 100,00 000 0
he pamen! for medi"al bills and !he "os! of open house par! are ou!righ! e'penses be"ause !he are no! a ne"essar "os! of a"-uiring !he land and building.
211 Problem 16- !" #e Land improvement& Pur"hase pri"e 7a!erials &'"ava!ion abor Remodeling Cash dis"oun!s %upervision Compensa!ion insuran"e Cleri"al and o!her e'penses Paving of s!ree!s Plans and spe"i*"a!ions egal egal "os! "os! 8 land land
1,300,000
$a#tor% building building
L an d
600,000 3,200,000 100,000 2,500,000 200,000
)0,000 30,000 50,000 30,000 40,000
10,0 10,000 00 1,31 ,310,00 ,000
//// ////// //// // 900,000
150,000 //// ////// //// // ),000,00 ,000
//// ////// //
40,000
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 a'es in arrears arrears Pamen! for land Demoli!ion of old building o!al o!al "os! of land
50,000 1,000,000 100,000 1,150,000
#r"hi!e"! fee Pamen! !o "i! hall Con!ra"! pri"e %afe! fen"e around "ons!ru"!ion si!e %afe! inspe"!ion on building 30,000 Removal of safe! fen"e o!al o!al "os! of fa"!or building
230,000 120,000 5,000,000 35,000 20,000 5,435,000
Problem 1)8) Pur"hase pri"e i!le "learan"e "learan"e fee Cos! of raing old building %"rap value of old building o!al o!al "os! of land Cons!ru"!ion "os! of ne( building
3,000,000 50,000 100,000 10,000 3,140,000 ,000,000
212 Problem 16-(
Pur"hase pri"e 4,000,000 Remodeling %alvage ma!erials rad rading ing,, leve leveli ling ng and and o!her o!her perm perman anen en!! impr improv ovem emen! en! Repair epairs s
Land Bui Building 1,000,000
150,000 5,000
50,000 50,000 ///// /////// /// / 1,050,000
10,0 10,000 00
4,155,000 he repairs are "api!alied "api!alied be"ause !he are ne"essar prior !o !he o""upan" and in!ended use of !he building.
Problem 16-) Land *a#+iner% $air value Repairs Remodeling nvoi"e pri"e Dis"oun! Base
1,500,000
///////// 1,500,000
Bui Buildin lding g
5,000,000 200,000 300,000 1,000,000 20,000 ///////// 50,000 5,500,000
1,030,000 he drive(a and par+ing lo! are "harged "harged !o land improvemen!s.
Problem 16-, Land *a#+iner% $air value 1,500,000 Repairs %pe"ial !a' assessmen! Pla!form Remodeling Pur"hase pri"e Dis"oun! $reigh! ns!alla!ion
1,500,000
Bui Building
4,000,000 200,000
30,000 60,000 400,000 ///////// 1,530,000
///////// 4,)00,000
00,000 40,000 20,000 30,000
2,30,000
Problem 16-10 Pur"hase pri"e Commission
2,000,000 100,000
Con!ra"! pri"e ), ),000,000 Plans, spe"i*"a!ion
egal fees i!le guaran!ee Cos! of raing old building %alvage value of ma!erials Cos! of land
50,000 10,000 65,000 5,000 2,230,000
and blueprin! #r"hi!e"!ural fee Cos! of ne( building
100,000 250,000 ),350,000
213 Problem 16-11 Land
Lea&e+old Building improvement&
*a#+iner%
Balan"es,
Pur"hase pri"e Commission Clearing "os! %ale of !imber and gravel #"-uisi!ion of land 8 =)22> Pur"hase pri"e Cos! of demoli!ion ?e( building> Cons!ru"!ion "os! &'"ava!ion fee #r"hi!e"!ural design Building permi! mprovemen!s> &le"!ri"al (or+ Cons!ru"!ion e'!ension 00,000 ' 1@2 mprovemen!s on oA"e spa"e Pur"hase of ne( ma"hine> nvoi"e pri"e $reigh! nloading "harge Balan"es, De"ember 31 2,00,000
1,500,000
4,000,000
500,000
3,000,000 )0,000 15,000 5,000 4,000,000 300,000 5,000,000 50,000 150,000 40,000 350,000 400,000 )50,000
///////// ,60,000
1,650,000 20,000 ///////// ///////// // 30,000 9,240,000 1,900,000
he !hird !ra"! of land should be presen!ed as "urren! asse! be"ause i! (as "lassi*ed as held for sale.
Problem 16-12 Land Land
improvement&
Building
*a#+iner%
Balan"es,
3,500,000 1,250,000
900,000
6,000,000
12@3) ' 4,500,000 24@3) ' 4,500,000 ?e( ma"hiner ?e( par+ing lo!, s!ree! and side(al+ 7a"hiner sold Balan"es, De". 31 4,400,000
1,500,000 3,000,000 3,400,000 //////// ),250,000
650,000 //////// ///////// 500,000 1,)50,000 10,000,000
he assessed values do no! represen! !he fair values of !he land and building bu! are used in allo"a!ing !he mar+e! value of !he share "api!al.
21 Problem 16-13 nvoi"e pri"e Cash dis"oun! $reigh! ns!alla!ion "os! es!ing "os!
Problem 16-1 3,000,000 nvoi"e "os! 4,000,000 150,000 Dis"oun! 5E ' 4,000,000 200,000 50,000 ranspor!a!ion 40,000 30,000 ns!alla!ion 100,000 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),000 00,000 Cos! of !ranspor!ing ma"hine ns!alla!ion "os! es!ing "os! %afe! rails and pla!form Ga!er devi"e Cos! of ad;us!men! &s!ima!ed disman!ling "os! o!al "os! of ma"hine
30,000 50,000 40,000 )0,000 0,000 65,000 )5,000 1,200,000
?o!e !ha! !he es!ima!ed disman!ling "os! is "api!alied be"ause !he "ompan has a pre&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 Hverhaul and repairs ns!alla!ion es!ing Iauling %afe! devi"e
2,400,000 150,000 0,000 110,000 10,000 250,000 3,000,000
Problem 16-1(
1. 7a!erials abor ns!alla!ion
)00,000 400,000 )0,000
rial run Dis"oun! Hverhead
30,000 40,000 150,000 1,200,000
2. #d;us!ing en!ries> 1. oss on re!iremen! of old ma"hiner 7a"hiner 20,000 F 14,000 ),000
),000
21' 2. Pur"hase dis"oun! 7a"hiner
40,000
3. 7a"hiner $a"!or overhead
150,000
4. Pro*! on "ons!ru"!ion 7a"hiner
100,000
5. ools 7a"hiner ). Depre"ia!ion F !ools ools 90,000 @ 3 ' 4@12 6. 7a"hiner #""umula!ed depre"ia!ion Depre"ia!ion F ma"hiner
40,000 150,000 100,000 90,000 90,000 10,000 10,000 12,)00 40,000 ,)00
Depre"ia!ion re"orded Corre"! depre"ia!ion 1,200,000 @ 10 ' 4@12 Hverdepre"ia!ion
12,)00 40,000 ,)00
Problem 16-1) ni!ial design fee &'e"u!ive "hairs and des+s %!orm (indo(s and ins!alla!ion ns!alla!ion of au!oma!i" door opening ss!em Hverhead "rane o!al "api!al e'pendi!ures
150,000 200,000 500,000 200,000 350,000 1,400,000
Problem 16-1, 1. #""umula!ed depre"ia!ion oss on re!iremen! of building Building Building Cash Depre"ia!ion ,100,000 @ 20
400,000 1,)00,000 2,000,000 2,500,000 2,500,000 405,000
#""umula!ed depre"ia!ion
405,000
Building 9,000,000 J 2,500,000 F 2,000,000 9,500,000 #""umula!ed depre"ia!ion 1,00,000 F 400,000 1,400,000 Boo+ value 2. #""umula!ed depre"ia!ion 1,9)0,000 ' 20E oss on re!iremen! of building Building 2,500,000 ' .64
,100,000 392,000 1,5),000 1,9)0,000
216 Building Cash Depre"ia!ion ,132,000 @ 20 #""umula!ed depre"ia!ion
2,500,000 2,500,000 40),)00 40),)00
Building 9,000,000 F 1,9)0,000 J 2,500,000 9,540,000 #""umula!ed depre"ia!ion 1,00,000 F 392,000 1,40,000 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 b. Building Cash
25 ears 2,500,000 2,500,000
". Building ,400,000 J 2,500,000 10,900,000 ess> #""umula!ed depre"ia!ion Boo+ value d. Depre"ia!ion 3,900,000 @ 15 #""umula!ed depre"ia!ion
6,000,000 3,900,000 2)0,000 2)0,000
Hriginal life 30 ess> &'pired life Remaining useful life, beginning of "urren! ear
25
#dd> &'!ension in life Revised useful life
10
5 15
Problem 16-21
1. Building Cash 2. Depre"ia!ion #""umula!ed depre"ia!ion 3. Building Cash #""umula!ed depre"ia!ion 2,500,000 @ 50 ' 2 oss on re!iremen! of building Cash
10,500,000 10,500,000 200,000 200,000 3,000,000 3,000,000 100,000 2,400,000 2,500,000
4. Depre"ia!ion 10,600,000 F 500,000 @ 4 #""umula!ed depre"ia!ion
212,500 212,500
21( Building 10,500,000 J 3,000,000 F 2,500,000 11,000,000 #""umula!ed depre"ia!ion 400,000 F 100,000 300,000 Boo+ value F 1@1@200
10,600,000
Problem 16-22 1. 7a"hiner Cash 2. Depre"ia!ion #""umula!ed depre"ia!ion 3. Depre"ia!ion 3,)00,000 @ ) #""umula!ed depre"ia!ion Cos! #""umula!ed depre"ia!ion> 2005 200) Boo+ value Residual value Remaining depre"iable "os! F 1@1@2006
5,000,000 5,000,000 450,000 450,000 )00,000 )00,000 5,000,000 450,000 450,000
4. 7a"hiner Cash
300,000
5. Depre"ia!ion 3,300,000 @ 5 #""umula!ed depre"ia!ion
))0,000
Cos! #""umula!ed depre"ia!ion 900,000 J )00,000 1,500,000 Boo+ value F 1@1@200
900,000 4,100,000 500,000 3,)00,000 300,000 ))0,000 5,300,000 3,00,000
Residual value Remaining depre"iable "os! F 1@1@200
500,000 3,300,000
Problem 16-23 1. Depre"ia!ion )0,000 ' 3@12 #""umula!ed depre"ia!ion #""umula!ed depre"ia!ion 40,000 J 15,000 oss on re!iremen! of s!ore e-uipmen! %!ore e-uipmen! 2. Depre"ia!ion 150,000 ' 4@12 #""umula!ed depre"ia!ion
15,000 15,000 495,000 105,000 )00,000 50,000 50,000
21) Cash #""umula!ed depre"ia!ion 1,050,000 J 50,000 oss on sale of oA"e e-uipmen! HA"e e-uipmen! 3. Depre"ia!ion )00,000 ' 5@12 #""umula!ed depre"ia!ion Deliver e-uipmen! F ne( #""umula!ed depre"ia!ion Cash 5,000,000 F 650,000 Deliver e-uipmen! F old ain on e'"hange 650,000 F 350,000
100,000 1,100,000 300,000 1,500,000 250,000 250,000 5,000,000 2,)50,000 4,250,000 3,000,000 400,000
Hriginal "os! ess> #""umula!ed depre"ia!ion !o da!e 2,400,000 J 250,000 2,)50,000 Boo+ value 4. #""umula!ed depre"ia!ion HA"e e-uipmen! 5. Depre"ia!ion 900,000 ' 9@12 #""umula!ed depre"ia!ion #""umula!ed depre"ia!ion 2,600,000 J )65,000 $ire loss 7a"hiner
3,000,000
350,000
1,200,000 1,200,000 )65,000 )65,000 3,365,000 1,125,000 4,500,000
Problem 16-2 1. Dis"oun! on bonds paable 7a"hiner
500,000 500,000
n!eres! e'pense 500,000 @ 10 ' 9@12 Dis"oun! on bonds paable
36,500
#""umula!ed depre"ia!ion Depre"ia!ion
65,000
36,500 65,000
Depre"ia!ion for 9 mon!hs )00,000 Depre"ia!ion for 12 mon!hs )00,000 @ 9@12 Depre"iable "os! 00,000 ' 5 ears Cos! ess> Residual value Depre"iable "os!
00,000 4,000,000 Per boo/ 5,000,000 1,000,000 4,000,000
Adu&ted 4,500,000 1,000,000 3,500,000
21, Corre"! depre"ia!ion for 9 mon!hs 3,500,000 @ 5 ' 9@12 525,000 ess> Depre"ia!ion re"orded Hvers!a!emen! 2. n!eres! e'pense 7a"hiner 3,500,000 F 3,200,000 7a"hiner $reigh! in #""umula!ed depre"ia!ion Depre"ia!ion
)00,000 65,000 300,000 300,000 150,000 150,000 30,000 30,000
Depre"ia!ion per boo+ Corre"! depre"ia!ion 3,350,000 @ 5 Hvers!a!emen! 3. oss on e'"hange 7a"hiner Cos! per boo+ Corre"! "os! rade in value #dd> Cash paid Hvers!a!emen!
600,000 )60,000 30,000 390,000 390,000 3,000,000 150,000 2,4)0,000
rade in value ess> Boo+ value oss on e'"hange 4. #llo(an"e for doub!ful a""oun!s oss on e'"hange F a""oun!s re"eivable
2,)10,000 390,000 150,000 540,000 390,000
40,000 )0,000
reasur share 900,000 Per boo/ 7a"hiner #""oun!s re"eivable reasur shares 7a"hiner +ould be 7a"hiner #llo(an"e for doub!ful a""oun!s 20E ' 4,200,000 oss on a""oun!s re"eivable #""oun!s re"eivable
4,200,000 4,200,000 4,200,000 4,200,000 3,300,000 40,000 )0,000 4,200,000
220 reasur shares 7a"hiner
3,300,000 3,300,000
he "os! of !reasur shares a"-uired for noncash consideration is usuall measured b !he recorded amount of !he non"ash asse! surrendered %$#% ?o. 1.
Problem 16-2' An&er A #llo"a!ed "os! of land 2,400,000 @ ),000,000 ' 5,500,000 2,200,000 Proper! !a'es 2,400 @ ),000 ' 250,000 Cos! of surve 5,000 o!al "os! of land
100,000 2,305,000
n"iden!all, !he "os! of !he building is> #llo"a!ed "os! 3,)00 @ ),000 ' 5,500,000 3,300,000 Proper! !a'es 3,)00 @ ),000 ' 250,000 Renova!ion o!al "os! of building
150,000 500,000 3,950,000
Problem 16-26 An&er A Pur"hase pri"e Pamen!s !o !enan!s Demoli!ion of old building egal fees i!le insuran"e 30,000 Pro"eeds from sale of ma!erials
4,000,000 200,000 100,000 50,000
10,000
o!al "os! of land
4,360,000
Problem 16-2( An&er Land Building Pur"hase pri"e of land egal fees for "on!ra"! #r"hi!e"! fee Demoli!ion of old building Cons!ru"!ion "os! o!al "os!
)00,000 20,000 0,000 50,000 /////// )60,000
3,500,000 3,50,000
Problem 16-2) An&er #"-uisi!ion pri"e Hp!ion of building a"-uired Repairs o!al "os!
6,000,000 200,000 500,000 6,600,000
221 Problem 16-2, An&er Pur"hase pri"e %hipping ns!alla!ion es!ing o!al "os!
250,000 5,000 10,000 35,000 300,000
Problem 16-30 An&er A Problem 16-31 An&er A #ll e'pendi!ures are "api!alied.
Problem 16-32 An&er A #ll "os!s are "api!alied.
Problem 16-33 An&er C Con!inuing and fre-uen! repairs Repain!ing of !he plan! building Par!ial repla"emen! of roof !iles Repair and main!enan"e e'pense
400,000 100,000 150,000 )50,000
Problem 16-3 An&er B Problem 16-3' An&er B
222 CHAPTER 1( Problem 1(-1 1. 2. 3. 4. 5. ). 6. . 9. 10.
# D B D D D D C C B
Problem 1(-3
Problem 1(-2 1. 2. 3. 4. 5. ). 6. . 9. 10.
C # D D D B C B # #
epre#iation Table 4 traig+t Line
5ear Parti#ular value #"-uisi!ion "os! 200 2009 2010 2011 2012
epre#iation
120,000 120,000 120,000 120,000 120,000 )00,000
A##umulated depre#iation
Boo/
)35,000 515,000 395,000 265,000 155,000 35,000
120,000 240,000 3)0,000 40,000 )00,000
epre#iation Table 4 ervi#e Hour& *et+od
5ear
Parti#ular #"-uisi!ion "os! 200 14,000 ' 10 495,000 2009 13,000 ' 10 3)5,000 2010 10,000 ' 10 2)5,000 2011 11,000 ' 10 155,000 2012 12,000 ' 10 35,000
A##umulated epre#iation depre#iation
140,000
140,000
130,000
260,000
100,000
360,000
110,000
40,000
120,000
)00,000
Boo/ value )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
5ear
200 2009 2010 2011 2012
Parti#ular #"-uisi!ion "os! 34,000 ' 4 32,000 ' 4 25,000 ' 4 29,000 ' 4 30,000 ' 4
epre#iation
13),000 12,000 100,000 11),000 120,000 )00,000
A##umulated epre#iation
13),000 2)4,000 3)4,000 40,000 )00,000
Depre"ia!ion ra!e per uni! of ou!pu! K )00,000 @ 150,000 K 4
Boo/ value )35,000 499,000 361,000 261,000 155,000 35,000
epre#iation Table 4 um o 5ear&7 igit&
5ear
Parti#ular #"-uisi!ion "os! 200 5@15 ' )00,000 435,000 2009 4@15 ' )00,000 265,000 2010 3@15 ' )00,000 155,000 2011 2@15 ' )00,000 65,000 2012 1@15 ' )00,000 35,000
epre#iation
A##umulated depre#iation
200,000
200,000
1)0,000
3)0,000
120,000
40,000
0,000
5)0,000
40,000
)00,000
Boo/ value )35,000
)00,000 %LD K 1 J 2 J 3 J 4 J 5 K 15 epre#iation Table 4 ouble e#lining Balan#e
5ear
Parti#ular #"-uisi!ion "os! 200 40E ' )35,000 31,000 2009 40E ' 31,000 22,)00 2010 40E ' 22,)00 136,1)0 2011 40E ' 136,1)0 2,29) 2012 2,29) F 35,000 35,000
epre#iation
A##umulated depre#iation
254,000
254,000
152,400
40),400
91,440 54,)4 46,29)
Boo/ value )35,000
496,40 552,604 )00,000
)00,000 $i'ed ra!e K 100E @ 5 K 20E ' 2 K 40E Problem 1(-
a. %!raigh! line me!hod> 200 2009
26,500 55,000
22 b. Gor+ing hours me!hod> 550,000 Ra!e per hour K 8888888888888888888 K 11 50,000 hours
200 3,000 hours ' 11 2009 5,000 hours ' 11
33,000 55,000
". Hu!pu! me!hod> 550,000 Ra!e per uni! K 88888888888888888888 K 2.65 200,000 uni!s 200 1,000 uni!s ' 2.65 49,500 2009 22,000 uni!s ' 2.65 )0,500 d. %um of ears: digi!s> 10 J 1 %LD K 10 888888888888 K 55 2 200 10@55 ' 550,000 ' )@12
50,000
2009
50,000
45,000
95,000
e. Double de"lining balan"e> 200 560,000 ' 20E ' )@12 56,000 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 2009 500,000 2010 500,000 2011 500,000 3,95
' .4366 F 21,50 ' .4366 8 341,909 ' .4366 F 411,105 F 50,000
21,50 123,059 )9,19)
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>
)0,000 156,500 216,500
b. ouble de#lining balan#e $i'ed ra!e K 100 @ K 12.5 ' 2 K 25E 200 1,200,000 ' 25E ' 9@12 2009 1,200,000 F 225,000 ' 25E 243,650
225,000
Problem 1(-( a. ervi#e +our& met+od8 9)0,000 F )0,000 Depre"ia!ion ra!e per hour K 8888888888888888888888888888 K 112.50 ,000 hours 200 1,000 hours ' 112.50 112,500 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
60,000 320,000
Problem 1(-) a. Ra!e per uni! 900,000 @ 10,000 5.00 200 5,000 ' 5 2009 20,000 ' 5 b. Double de"lining balan"e> $i'ed ra!e 100E @ ' 2 25E 200 920,000 ' 25E ' )@12 115,000
25,000 100,000
2009 920,000 920,000 F 115,000 ' 25E
201,250
226 ". %um of ears: digi!s>
100,000
6,500 16,500
Problem 1(-, epre#iable Annual A&&et& depre#iation 7a"hiner HA"e e-uipmen! Building Deliver e-uipmen!
Co&t
310,000 110,000 1,)00,000 43 430,000 2,450,000
alvage
10,000 10,000 100,000 30 30,000
Lie in #o #o&t
300,000 100,000 1,500,000 400,000 2,300,000
%ear&
5 10 15 4
)0,000 10,000 100,000 100,000 260,000
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 #""umula!ed depre"ia!ion
260,000 260,000
Problem 1(-10 A&&et& %ear& Building
epre#iable alvage
Co&t
depre#iation ),100,000 300,000 7a"hiner 2,550,000 500,000 &-uipmen! 1,030,000 9,)0,000 900,000
100,000
Lie in Annual #o&t
),000,000
50,000
2,500,000
30,000
1,000,000 9,500,000
20 5 10
100,000
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 #""umula!ed depre"ia!ion d. Cash
900,000 900,000 40,000
#""umula!ed depre"ia!ion 7a"hiner
2,510,000 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
De". 31 Depre"ia!ion 20E ' 900,000 #""umula!ed depre"ia!ion
900,000 900,000 10,000 10,000
200 De". 31 Depre"ia!ion #""umula!ed depre"ia!ion
10,000
200' De". 31 Depre"ia!ion #""umula!ed depre"ia!ion
10,000
2006 De". 31 Depre"ia!ion #""umula!ed depre"ia!ion
10,000
C Ca ash #""umula!ed depre"ia!ion 7a"hiner 4 ' 45,000 200( De". 31 Depre"ia!ion 620,000 ' 20E #""umula!ed depre"ia!ion
Cash #""umula!ed depre"ia!ion 7a"hiner 14 ' 45,000 200) De". 31 Depre"ia!ion #""umula!ed depre"ia!ion
10,000
10,000
10,000 10,000 160,000 10,000 144,000 144,000 15,000 )15,000 )30,000 9,000 9,000
Remaining "os! ess> Balan"e of a""umula!ed depre"ia!ion Boo+ value ess> %alvage pro"eeds 7a 7a'imum depre"ia!ion Cash
90,000 69,000 11,000 2,000 9,000 2,000
#""umula!ed depre"ia!ion 7a"hiner 4 ' 45,000
,000 90,000
22) Problem 1(-12 1. Hld ma"hiner overhauled 240,000 J )0,000 #""umula!ed depre"ia!ion 2005 240,000 @ 200) 2006 o!al Boo+ value F
300,000 30,000 30,000 30,000 90,000 210,000
Hld ma"hiner overhauled 210,000 @ 6 ears Remaini emaining ng "os! "os! of old ma"hin ma"hiner er 1,152, 1,152,000 000 F 240,000 240,000 @ ?e( ma"hiner 4)0,00 @ ' 5@12 o!al depre"ia!ion 2. Hld ma"hiner ?e( ma"hiner Cos! of overhaul o!al "os! #""umula!ed depre"ia!ion> Balan"e F
30,000 114,000 114,000 24,000 1),000 1,152,000 4)0,00 )0,000 1,)62,00 432,000 1),000
Problem 1(-13 7ain ma"hine 6,500,000 @ 10 $irs! "omponen! F from
650,000
300,000 1,100,000
he se"ond "omponen! is depre"ia!ed over !he remaining life of !he main ma"hine. he original life is 10 ears and ) ears alread e'pired. hus, !he remaining life is 4 ears.
Problem 1(-1 1. ools Cash
40,000 40,00 0
2. ools Cash
20,000
40,000 20,000
3. Cash ools
4,000 4,000
4. Depre"ia!ion ools
4),000 4),000
Balan"e of !ools a""oun! ess> &s!ima!ed "os! on De"ember 31 Depre"ia!ion
19),000 150,000 4),000
22, Problem 1(-1' Retirement met+od
7ar"h
1 &le"!ri" me!ers Cash
250,000
1 Cash Depre"ia!ion &le"!ri" me!ers
20,000 1)0,000
250,000
1 &le"!ri" me!ers Cash
10,000 400,000 400,000
De"ember 1 &le"!ri" me!ers Cash
200,000 200,000
1 Cash Depre"ia!ion &le"!ri" me!ers
15,000 135,000 150,000
Repla#ement met+od
7ar"h
1 Depre"ia!ion 250,000 F 20,000 Cash 1 &le"!ri" me!ers Cash
230,000 230,000 400,000 400,000
De"ember 1 Depre"ia!ion 200,000 F 15,000 Cash
15,000 15,000
Problem 1(-16 Retirement met+od 200) ools Cash
120,000 120,000
Cash 300 ' 50 Depre"ia!ion ools 300 ' 200
15,000 45,000 )0,000
200, ools Cash
3)0,000 3)0,000
Cash 600 ' 60 Depre"ia!ion ools
49,000 111,000 1)0,000
230 500 ' 200 200 ' 300 Cos! of !ools re!ired
100,000 )0,000 1)0,000 Repla#ement met+od
200) ools 100 ' 300 Depre"ia!ion 300 ' 30 Cash
30,000 90,000 120,000
Cash Depre"ia!ion
15,000 15,000
200, ools 200 ' 400 Depre"ia!ion 600 ' 400 Cash
0,000 20,000 3)0,000
Cash Depre"ia!ion
49,000 49,000 9nventor% met+od
200) ools Cash Cash ools
Depre"ia!ion 2)5,000 F 200,000 ools 200, ools Cash
Cash ools Depre"ia!ion 511,000 8 350,000 ools
Problem 1(-1(
120,000 120,000 15,000 15,000 )5,000 )5,000 3)0,000 3)0,000 49,000 49,000 1)1,000 1)1,000
1. and 350,000 J 450,000 00,000 and a"-uired 30,000 J 25,000 J 45,000 2. Depre"ia!ion of land improvemen!s 10,000 @ 15
450,000 12,000
3. Depre"ia!ion of building 4,500,000 F 1,050,000 ' 6.5E 25,650
231 4. Depre"ia!ion of ma"hiner and e-uipmen! 1,1)0,000 F )0,000 @ 10 300,000 @ 10 30,000 )0,000 @ 10 ' )@12 3,000
110,000
143,000 5. $i'ed ra!e 100E @ 3 ' 1.5 50E 1,00,000 F 1,344,000 ' 50E 22,000
Problem 1(-1) 1. Beginning balan"e #"-uisi!ion 150,000 @ 650,000 ' 1,250,000 250,000 o!al "os! of land
65,000 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 ' E 4),440 ?e( )00,000@650,000 ' 1,250,000 K 1,000,000 ' E 0,000 Depre"ia!ion F building 3. 2,250,000 @ 10 400,000 @ 10 ' )@12 20,000 Depre"ia!ion F ma"hiner 4. Depre"ia!ion F leasehold improvemen!s 21),000 F 10,000 @ 5 ears 21,)00 5. Depre"ia!ion F land improvemen!s 192,000 @ 12 ' 9@12 12,000
Problem 1(-1,
54,440 225,000 245,000
1. Hld building 4,)62,200 ' 10E ?e( building Dire"! "os! $i'ed 15,000 ' 25 Mariable 15,000 ' 26 o!al "os! 3,000,000 ' 10E o!al depre"ia!ion
4)6,220 2,220,000 365,000 405,000 3,000,000 300,000 6)6,220
$i'ed ra!e 100 @ 20 ' 2
10E
232 2. Hld ma"hiner 1,30,000 @ 10 ?e( ma"hiner nvoi"e "os! Con"re!e embedding Gall demoli!ion Rebuilding of (all o!al "os! 400,000 @ 10 ' )@12 20,000 o!al depre"ia!ion
13,000 35),000 1,000 6,000 19,000 400,000 15,000
Problem 1(-20 An&er A Cos! of ma"hiner "ash pri"e ess> Residual value Depre"iable "os!
1,100,000 50,000 1,050,000
%!raigh! line depre"ia!ion 1,050,000 @ 10
105,000
Problem 1(-21 An&er B %ales pri"e Boo+ value> Cos! #""umula!ed depre"ia!ion 3,)00,000 @ 5 ' 3 ain
2,300,000 4,200,000 2,1)0,000
2,040,000 2)0,000
Problem 1(-22 An&er B #""umula!ed depre"ia!ion F 12@31@2006 #dd> Depre"ia!ion for 200 o!al
3,600,000 550,000 4,250,000
ess> #""umula!ed depre"ia!ion on proper!, plan! and e-uipmen! re!iremen!s s-ueee #""umula!ed depre"ia!ion F 12@31@200
250,000 4,000,000
Problem 1(-23 An&er B Co&t depre#iation # 550,000 B 200,000 C 40,000 690,000
alvage
50,000 20,000
epre#iable #o&t
500,000 10,000 40,000 620,000
Composi!e life K 620,000 @ 45,000
Annual Lie
20 15 5
25,000 12,000 ,000 45,000 1) ears
233 Problem 1(-2 An&er nvoi"e pri"e Cash dis"oun! 2E ' 4,500,000 Deliver "os! ns!alla!ion and !es!ing o!al "os! %alvage value Depre"iable "os!
4,500,000 90,000 0,000 310,000 4,00,000 00,000 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! #""umula!ed depre"ia!ion 2006 @3) ' 3,)00,000 200 6@3) ' 3,)00,000 1,500,000 Boo+ value, 12@31@200
Problem 1(-26 An&er B he *rs! !hree fra"!ions are> 200) 2006 200
10@55 9@55 @55
hus, !he 200 depre"ia!ion of P240,000 is e-ual !o @55.
4,000,000 00,000 600,000 2,500,000
Depre"iable "os! 240,000 @ @55 %alvage o!al "os!
1,)50,000 50,000 1,600,000
Problem 1(-2( An&er B #pril 1, 200) !o 7ar"h 31, 2006 5@15 ' 3,000,000 1,000,000 #pril 1, 2006 !o 7ar"h 31, 200 4@15 ' 3,000,000 00,000 #""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!ain me!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 ' 900,000 300,000 200) 4@15 ' 900,000 240,000 2006 3@15 ' 900,000 10,000 #""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 ' 900,000 120,000
Problem 1(-2, An&er B %!raigh! line ra!e 100E @ ears $i'ed ra!e 12.5 ' 2 2006 depre"ia!ion 1,20,000 ' 25E 320,000 200 depre"ia!ion 1,20,000 F 320,000 ' 25E
12.5E 25E 240,000
Problem 1(-30 1. 4,000,000 F 2,5)0,000 ' 40E 2. 1,00,000 ' 2@15 %LD 3. %ales pri"e Boo+ value 2,00,000 F 1,344,000 1,45),000 ain
An&er An&er A
56),000 240,000 1,600,000
An&er A
244,000
Problem 1(-31 An&er B %!raigh! line ra!e 100E @ 5 ears $i'ed ra!e 20E ' 2 200) depre"ia!ion 5,000,000 ' 40E 2,000,000 2006 depre"ia!ion 3,000,000 ' 40E 1,200,000 #""umula!ed depre"ia!ion, De"ember 31, 2006 Depre"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
20E 40E
3,200,000 3,00,000
Problem 1(-32 An&er A Cos! F 1@1@2005 #""umula!ed depre"ia!ion F 12@31@2006 6,200,000 @ 10 ' 3 Boo+ value F 12@31@2006
6,200,000 2,1)0,000 5,040,000
%LD for !he remaining life of 6 ears 1 J 2 J 3 J 4 J 5 J ) J 6 2 Depre"ia!ion for 200 5,040,000 ' 6@2
1,2)0,000
Problem 1(-33 An&er B #nnual depre"ia!ion 1,53),000 @ 192,000
23' Problem 1(-3 An&er B $i'ed ra!e 100E @ 4 ' 2 Cos! Depre"ia!ion for 2006 50E ' ),000,000 Boo+ value F 1@1@200 Residual value 7a'imum depre"ia!ion in 200 $i'ed ra!e in 200 100E @ 2 ' 2
50E ),000,000 3,000,000 3,000,000 )00,000 2,400,000 100E
his means !ha! !he "ompu!ers should be full depre"ia!ed in 200. %in"e !here is a residual 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 1. 2. 3. 4. 5.
D # # C #
Problem 1)-2 1. 2. 3. 4. 5.
B C C C D
Problem 1)-3 1. Hre proper! Cash
5,000,000
2. Hre proper! Cash
3,000,000
3. 7a"hiner Cash
4,000,000
4. Deple!ion
1,140,000
5,000,000
3,000,000 4,000,000
#""umula!ed depre"ia!ion
1,140,000
,000,000 F 400,000 K 6,)00,000 6,)00,000 @ 2,000,000 K 3.0 300,000 ' 3.0 K 1,140,000 5. Depre"ia!ion #""umula!ed depre"ia!ion
)00,000 )00,000
4,000,000 @ 2,000,000 K 2.00 300,000 ' 2.00 K )00,000
Problem 1)- 200)
Ro"+ and gravel proper! Cash Deple!ion 1,000,000 ' .40 #""umula!ed deple!ion
200,
Ro"+ and gravel proper! Cash Deple!ion )00,000 ' .65 #""umula!ed deple!ion
9)0,000 9)0,000 400,000 400,000 490,000 490,000 450,000 450,000
23( o!al "os! 9)0,000 J 490,000 1,450,000 ess> #""umula!ed deple!ion Deple!able "os! Divide b es!ima!ed remaining ou!pu! 2,400,000 F 1,000,000 Revised deple!ion ra!e per !on 2010
Ro"+ and gravel proper! Cash Deple!ion 600,000 ' .44 #""umula!ed deple!ion
o!al "os! #dd> #ddi!ional developmen! "os! o!al ess> #""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
400,000 1,050,000 1,400,000 .65
500,000 500,000 30,000 30,000 1,450,000 500,000 1,950,000
.44
Problem 1)-' 200)
Resour"e proper! Cash Building &-uipmen! Cash Deple!ion 12,000 ' 32 #""umula!ed deple!ion
3,9)0,000 3,9)0,000 9)0,000 1,240,000 2,200,000 34,000 34,000
Cos! of resour"e proper! ess> Residual value 120,000 Deple!able "os! 3,40,000 Divide b es!ima!ed ou!pu! Deple!ion ra!e per uni! Depre"ia!ion 12,000 ' #""umula!ed depre"ia!ion F building
3,9)0,000
120,000 32 9),000 9),000
9)0,000 Depre"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 building be"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 #""umula!ed depre"ia!ion 1,240,000 @ 4 ears K 310,000
310,000 310,000
he s!raigh! line me!hod is used for !he heav e-uipmen! be"ause !he life of 4 ears is shor!er !han !he life of !he resour"e proper! of 5 ears. 200, Deple!ion #""umula!ed deple!ion 25,000 ' 32
00,000 00,000
Depre"ia!ion 25,000 ' #""umula!ed depre"ia!ion F building
200,000
Depre"ia!ion #""umula!ed depre"ia!ion F e-uipmen!
310,000
200,000 310,000
Problem 1)-6 200) Hre proper! Cash
5,400,000 5,400,000
Hre proper! &s!ima!ed liabili! for res!ora!ion "os! 7ine improvemen!s Cash 200, Deple!ion )00,000 ' 2.)0 #""umula!ed deple!ion
Depre"ia!ion )00,000 ' 4 #""umula!ed depre"ia!ion
450,000 450,000 ,000,000 ,000,000 1,5)0,000 1,5)0,000 2,400,000
2010 Deple!ion 400,000 ' 1.)0 #""umula!ed deple!ion
2,400,000 )40,000 )40,000
Deple!able "os! ess> 2009 deple!ion Balan"e 3,)40,000 @ 2,265,000 K 1.)0 7ine improvemen!s Cash Depre"ia!ion 400,000 ' 2.0 #""umula!ed depre"ia!ion Cos! ,000,000 J 660,000 ess> #""umula!ed depre"ia!ion Boo+ value ),360,000 @ 2,265,000 K 2.0 ),360,000
5,200,000 1,5)0,000 3,)40,000 660,000 660,000 1,120,000 1,120,000 ,660,000 2,400,000
23, Problem 1)-( Deple!ion ra!e 5,000,000 @ 1,000,000 Depre"ia!ion ra!e ,000,000 @ 1,000,000
5.00 .00
$ir&t %ear Deple!ion 200,000 ' 5 Depre"ia!ion 200,000 '
1,000,000 1,)00,000
e#ond %ear Deple!ion 250,000 ' 5 Depre"ia!ion 250,000 '
1,250,000 2,000,000
T+ird %ear Deple!ion Depre"ia!ion %"hedule #
none 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 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
3,)00,000
$ourt+ %ear Deple!ion 100,000 ' 5 Depre"ia!ion %"hedule B
500,000 600,000
%"hedule B F Compu!a!ion of depre"ia!ion for four!h ear Cos! of e-uipmen! ess> #""umula!ed depre"ia!ion Boo+ value F beginning of four!h ear
,000,000 4,150,000
3,50,000
Hriginal es!ima!e of resour"e deposi!s ess> &'!ra"!ed in *rs! and se"ond ears Remaining ou!pu!
1,000,000 !ons 450,000 550,000 !ons
Depre"ia!ion ra!e per uni! 3,50,000 @ 550,000 Depre"ia!ion for !hird ear 100,000 ' 6 600,000
6.00
Problem 1)-) 1. Re!ained earnings #""umula!ed deple!ion o!al ess> Capi!al li-uida!ed Deple!ion in ending inven!or 5,000 ' 20 1,900,000 7a'imum dividend
1,500,000 2,500,000 4,000,000 1,00,000 100,000 2,100,000
20 2. Re!ained earnings Capi!al li-uida!ed Dividends paable
1,00,000 200,000 2,000,000
Problem 1)-, 1. Cash 50,000 ' 110 %hare "api!al 50,000 ' 100 5,000,000 %hare premium
5,500,000 500,000
2. Resour"e proper! Cash
3,000,000
3. 7ining e-uipmen! Cash
00,000
3,000,000 00,000
4. Cash 5,000 ' 50 %ales
4,250,000 4,250,000
5. 7ining and o!her dire"! "os! #dminis!ra!ive e'penses Cash
2,2),000 500,000 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 #""umula!ed depre"ia!ion 8 mining e-uipmen!
62,000 62,000
Depre"ia!ion ra!e 00,000 @ 1,000,000 K .0 . nven!or, De"ember 31 5,000 ' 29 Pro*! and loss
145,000 145,000
7ining labor and o!her dire"! "os!s Deple!ion Depre"ia!ion o!al produ"!ion "os!s in"urred Divide b number of uni!s e'!ra"!ed ni! "os!
2,2),000 260,000 62,000 2,)10,000 90,000 29
21 *ultinational Compan% 9n#ome tatement 5ear ended e#ember 31: 200)
%ales Cos! of sales 7ining labor and o!her dire"! "os!s Deple!ion Depre"ia!ion o!al produ"!ion "os! ess> nven!or, De"ember 31 2,4)5,000 ross in"ome #dminis!ra!ive e'penses ?e! in"ome
4,250,000 2,2),000 260,000 62,000 2,)10,000 145,000 1,65,000 500,000 1,25,000
*ultinational Compan% tatement o $inan#ial Po&ition e#ember 31: 200) A&&et&
Curren! asse!s> Cash nven!or ?on"urren! asse!s> Resour"e proper! ess> #""umula!ed deple!ion 7ining e-uipmen! ess> #""umula!ed depre"ia!ion o!al asse!s
3,12,000 145,000 3,000,000 260,000 00,000 62,000
3,326,000
2,630,000 62,000
3,45,000 ),65,000
Euit%
%hare "api!al %hare premium Re!ained earnings o!al e-ui! Re!ained earnings #dd> #""umula!ed deple!ion o!al ess> nrealied deple!ion in ending inven!or 5,000 ' 3 15,000 7a'imum dividend
Re!ained earnings Capi!al li-uida!ed Dividends paable
5,000,000 500,000 1,25,000 ),65,000 1,25,000 260,000 1,555,000 1,540,000
1,25,000 255,000 1,540,000
22 Problem 1)-10 1. Pur"hase pri"e Road "ons!ru"!ion mprovemen!s and developmen! "os!s o!al "os! Residual value Deple!able "os! Deple!ion ra!e per uni! 5,200,000 @ 4,000,000 1.30 Deple!ion for 200 500,000 ' 1.30 Deple!able "os! Deple!ion in 200
50,000 5,000,000 650,000 5,00,000 )00,000 5,200,000
)50,000 5,200,000 )50,000
Remaining deple!able "os! Developmen! "os!s in 2009 o!al deple!able "os! F 1@1@2009
4,550,000 1,300,000 5,50,000
Hriginal es!ima!ed !ons #ddi!ional es!ima!e o!al es!ima!ed !ons &'!ra"!ed in 200 Remaining !ons F 1@1@2009 ),500,000
4,000,000 3,000,000 6,000,000 500,000
?e( deple!ion ra!e per uni! 5,50,000 @ ),500,000 Deple!ion for 2009 1,000,000 ' .90 2. Cos! of buildings Residual value Depre"iable "os! Depre"ia!ion ra!e per uni! 1,00,000 @ 4,000,000 Depre"ia!ion for 200 500,000 ' .45
.90 900,000 2,000,000 200,000 1,00,000 .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! Depre"ia!ion for 200 Remaining depre"iable "os! #ddi!ional building in 2009 o!al depre"iable "os! F 1@1@2009
1,00,000 225,000 1,565,000 365,000 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 ' .30 300,000
23 Problem 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! 2,000,000 Developmen! "os! F 200 1,000,000 Developmen! "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 ,100,000 2010 ons e'!ra"!ed in 2010 3,500,000 ons remaining in 12@31@2010 2,500,000 o!al es!ima!ed ou!pu! F 1@1@2010 ),000,000 ?e( ra!e in 2010 26,000,000 F ,100,000@),000,000 3.15 Deple!ion in 2010 3,500,000 ' 3.15 11,025,000
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! 31,00,000 ess> Residual value 3,000,000 Deple!able "os! 2,00,000 Ra!e per uni! 2,00,000 @ 1,200,000 24 Deple!ion for 200 )0,000 ' 24 1,440,000
Problem 1)-13 An&er C Deple!ion ra!e per uni! 9,200,000 @ 4,000,000
Problem 1)-1 An&er C Ra!e per uni! 4),00,000 F 3,)00,000 @ 2,1)0,000 20
2.30
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 value 3,000,000 Deple!able "os! 6,000,000 ess> #""umula!ed deple!ion F 12@31@2006 6,000,000 @ 10,000,000 K .60 ' 4,000,000 2,00,000 Remaining deple!able "os! F 1@1@200 4,200,000 ?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! 33,000,000 Deple!ion for 2006 33,000,000 @ 4,000,000 K .25 ' 200,000 1,)50,000 Balan"e F 1@1@200 31,350,000 Produ"!ion in 200 ?e( es!ima!e F 12@31@200 5,000,000 ?e( es!ima!e F 1@1@200 5,225,000 Deple!ion for 200 31,350,000 @ 5,225,000 K ) ' 225,000 1,350,000
Problem 1)-1( ;ue&tion 1 4 An&er A
Pur"hase pri"e 14,000,000 ess> Residual value 2,000,000 Deple!able "os! 12,000,000
225,000
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
300,000
%in"e !he life of !he mine is shor!er !han !he life of !he e-uipmen!, !he ou!pu! me!hod is used in "ompu!ing depre"ia!ion.
2' &-uipmen! ess> Residual value Depre"iable "os!
,000,000 500,000 6,500,000
Ra!e per uni! 6,500,000 @ 1,500,000 5.00 Depre"ia!ion for 200 150,000 ' 5 650,000
Problem 1)-1) An&er C Pur"hase pri"e Developmen! "os!s in 2006 o!al "os! Residual value Deple!able "os!
9,000,000 300,000 9,300,000 1,200,000 ,100,000
Ra!e in 2006 ,100,000 @ 2,000,000 4.05 Deple!ion for 2006 200,000 ' 4.05 10,000 Deple!able "os! Deple!ion in 2006 10,000 Balan"e 6,290,000 Developmen! "os!s in 200 135,000
,100,000
Deple!able "os! in 200 6,425,000 Ra!e in 200 6,425,000 @ 1,)50,000 4.50 Deple!ion for 200 300,000 ' 4.50 1,350,000
26 CHAPTER 1, Problem 1,-1 1. 2. 3. 4. 5.
C B D C C
). 6. . 9. 10.
B C # B #
Problem 1,-2 1. #ppre"ia!ion 6,200,000 F 4,500,000
2,600,000
2. Boo+ value 4,500,000 F 900,000 3,)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 ears 2. &-uipmen! #""umula!ed depre"ia!ion Revalua!ion surplus 3. Depre"ia!ion 4,00,000 @ 20 #""umula!ed depre"ia!ion
20 1,00,000 450,000 1,350,000 240,000 240,000
4. Revalua!ion surplus Re!ained earnings 1,350,000 @ 15
90,000 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 ears 2. 7a"hiner #""umula!ed depre"ia!ion 40E ' ),000,000 Revalua!ion surplus 3. Depre"ia!ion 9,000,000 @ 15 #""umula!ed depre"ia!ion
10 ),000,000 2,400,000 3,)00,000 )00,000 )00,000
2( 4. Revalua!ion surplus Re!ained earnings 3,)00,000 @ 15
240,000 240,000
Problem 1,-' Proportional approach
1. Building #""umula!ed depre"ia!ion Revalua!ion surplus 2. Depre"ia!ion ,000,000 @ 40 or ),000,000 @ 30 #""umula!ed depre"ia!ion
3,000,000 650,000 2,250,000 200,000 200,000
ross repla"emen! "os! ),000,000 @ 65E ,000,000 3. Revalua!ion surplus Re!ained earnings 2,250,000 @ 30
65,000 65,000
Elimination approach
1. #""umula!ed depre"ia!ion Building
1,250,000 1,250,000
Building ),000,000 F 3,650,000 Revalua!ion surplus
2,250,000 2,250,000
2. Depre"ia!ion ),000,000 @ 30 #""umula!ed depre"ia!ion
200,000 200,000
3. Revalua!ion surplus Re!ained earnings
65,000 65,000
Problem 1,-6 1. &-uipmen! #""umula!ed depre"ia!ion Revalua!ion surplus
2,600,000
2. Depre"ia!ion 6,500,000 @ 10 #""umula!ed depre"ia!ion
650,000
3. Revalua!ion surplus 2,200,000 @ 10 Re!ained earnings
220,000
500,000 2,200,000 650,000 220,000
4. Cash #""umula!ed depre"ia!ion &-uipmen! ain on sale of e-uipmen!
,000,000 2,250,000 9,200,000 1,050,000
2) Revalua!ion surplus Re!ained earnings
2,200,000 8 220,000
1,90,000 1,90,000
Problem 1,-( 1. Building #""umula!ed depre"ia!ion Revalua!ion surplus
10,000,000
2. Depre"ia!ion 13,000,000 @ 5 #""umula!ed depre"ia!ion
2,)00,000
3. Revalua!ion surplus Re!ained earnings ),000,000 @ 5
1,200,000
4,000,000 ),000,000 2,)00,000 1,200,000
Problem 1,-) Repla#ement Co&t
Building #""umula!ed depre"ia!ion 400,000
#o&t
Appre#iation 3,000,000 )00,000
5,000,000 1,000,000
2,000,000
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 4E 25 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 #""umula!ed depre"ia!ion Revalua!ion surplus
2,000,000 400,000 1,)00,000
b. Corre"!ing en!r> Building Re!ained earnings #""umula!ed depre"ia!ion Revalua!ion surplus
1,000,000 1,000,000
". Depre"ia!ion 4,000,000 @ 20 #""umula!ed depre"ia!ion
200,000
400,000 1,)00,000 200,000
d. Revalua!ion surplus Re!ained earnings 1,)00,000 @ 20
2,
0,000 0,000
Problem 1,-, 1. #""umula!ed depre"ia!ion 7a"hiner
00,000
2. Re!ained earnings Revalua!ion surplus
400,000
00,000 400,000
Problem 1,-10 Repla#ement Co&t #o&t
and
Appre#iation 5,000,000
10,000,000
25,000,000
45,000,000
5,000,000 Building 20,000,000 #""umula!ed depre"ia!ion
25,000,000 ' 3@25 45,000,000 ' 3@25 2,400,000
3,000,000 /////////
5,400,000
22,000,000
39,)00,000
16,)00,000 7a"hiner #""umula!ed depre"ia!ion 10,000,000 ' 3@5 15,000,000 ' 3@5 3,000,000
10,000,000 ),000,000 //////////
15,000,000
5,000,000
9,000,000
4,000,000
),000,000
2,000,000 Repla#ement Co&t #o&t
&-uipmen! 1,200,000 #""umula!ed depre"ia!ion 3,000,000 ' 3@10 4,200,000 ' 3@10
Appre#iation 3,000,000
900,000 ///////// 2,100,000
4,200,000
1,2)0,000 / 3)0,000 2,940,000
40,000 a. and Building 7a"hiner &-uipmen! #""umula!ed depre"ia!ion F building #""umula!ed depre"ia!ion F ma"hiner #""umula!ed depre"ia!ion F e-uipmen! Revalua!ion surplus
5,000,000 20,000,000 5,000,000 1,200,000
b. Depre"ia!ion #""umula!ed depre"ia!ion F building #""umula!ed depre"ia!ion F ma"hiner #""umula!ed depre"ia!ion F e-uipmen!
5,220,000
2,400,000 3,000,000 3)0,000 25,440,000 1,00,000 3,000,000 420,000
2'0
Building> Cos! 22,000,000 @ 22 #ppre"ia!ion 16,)00,000 @ 22
7a"hiner> Cos! 4,000,000 @ 2 #ppre"ia!ion 2,000,000 @ 2 &-uipmen!> Cos! 2,100,000 @ 6 #ppre"ia!ion 40,000 @ 6 o!al depre"ia!ion
1,000,000 00,000 1,00,000
2,000,000 1,000,000 300,000 120,000
3,000,000
420,000 5,220,000
". Revalua!ion surplus Re!ained earnings 00,000 J 1,000,000 J 120,000 1,920,000
1,920,000
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 value 53,320,000 he follo(ing dis"losure should be made in !he no!es !o *nan"ial s!a!emen!s> Repla#ement
and Building 7a"hiner &-uipmen! o!al #""umula!ed depre"ia!ion ?e! "arring value
Co&t 5,000,000 25,000,000 10,000,000 3,000,000 43,000,000 13,200,000 29,00,000
#o&t 10,000,000 45,000,000 15,000,000 4,200,000 64,200,000 20,0,000 53,320,000
#+edule o A##umulated epre#iation
Repla#ement
Building 7a"hiner &-uipmen!
Co&t 4,000,000 ,000,000 1,200,000 13,200,000
#o&t 6,200,000 12,000,000 1,)0,000 20,0,000
2'1 Problem 1,-11 An&er B
Building #""umula!ed depre"ia!ion 650,000
Co&t Appre#iation 5,000,000 1,250,000
3,650,000 2,250,000
Repla#ement #o&t
,000,000 3,000,000 2,000,000 ),000,000
Problem 1,-12 An&er B ound Revaluation value
Boo/ value
&urplu&
and
5,000,000
3,000,000 Building 65E ' 25,000,000 6,500,000 7a"hiner 50E ' 5,000,000 1,000,000
2,000,000
1,650,000
11,250,000
2,500,000
1,500,000
11,500,000
Problem 1,-13 An&er $air value F De"ember 31, 200 ?e! boo+ value F De"ember 31, 200 Revalua!ion surplus
450,000 302,500 142,500
Problem 1,-1 Nues!ion 1 Nues!ion 2 Nues!ion 3
An&er A An&er B An&er B
Problem 1,-1' 1. 2. 3. 4. 5.
# C B # #
). # 6. # . D 9. D 10. D
11. 12. 13. 14. 15.
# # # D #
Problem 1,-16 1. mpairmen! loss #""umula!ed depre"ia!ion Cos! #""umula!ed depre"ia!ion Boo+ value F
900,000 900,000 4,500,000 2,100,000 2,400,000 1,500,000 900,000 500,000 500,000
2'2 3. Cos! #""umula!ed depre"ia!ion 2,100,000 J 900,000 J 500,000
4,500,000 3,500,000
Boo+ value F De"ember 31
1,000,000
Problem 1,-1( 1. mpairmen! loss #""umula!ed depre"ia!ion
1,125,000 1,125,000
Cos! F
2,500,000 2,000,000 65,000 1,125,000 365,000 2,500,000 2,000,000 500,000
Problem 1,-1) 1. HOer pri"e Cos! of disman!ling and removal assumed b !he bidder $air value less "os! !o sell Presen! value of fu!ure "ash o(s 33,000,000 ess> &s!ima!ed liabili! Malue in use
25,000,000 5,000,000 30,000,000
5,000,000 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 !he es!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. mpairmen! loss #""umula!ed depre"ia!ion
4,000,000 4,000,000
2'3 Problem 1,-1,
1.
200 1),640,000 2009 12,55,000 2010 11,910,000 2011 ,20,000
P> a#tor Pre&ent value .930
15,000,000
.56
15,000,000
.694
12,000,000
.635
)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 #""umula!ed depre"ia!ion )5,000,000 F 50,325,000
14,)65,000
4. Depre"ia!ion #""umula!ed depre"ia!ion 50,325,000 @ 4 12,51,250
12,51,250
14,)65,000
Problem 1,-20 1. Depre"ia!ion #""umula!ed depre"ia!ion 10,000,000 @ 10
1,000,000
2. Depre"ia!ion #""umula!ed depre"ia!ion
1,000,000
3. mpairmen! loss #""umula!ed depre"ia!ion
2,000,000
4. Depre"ia!ion #""umula!ed depre"ia!ion ),000,000 @ 5. #""umula!ed depre"ia!ion ain on impairmen! re"over
1,000,000 1,000,000 2,000,000 650,000 650,000 1,650,000 1,650,000
Cos! F 1@1@200) #""umula!ed depre"ia!ion 10,000,000 @ 10 ' 2 Boo+ value F 12@31@2006 mpairmen! loss F 2006 #d;us!ed boo+ value F 12@31@2006 Depre"ia!ion F 200 ),000,000 @ 650,000 Boo+ value F 12@31@200
10,000,000 2,000,000 ,000,000 2,000,000 ),000,000
Cos! F 1@1@200) #""umula!ed depre"ia!ion 10,000,000 @ 10 ' 3 Boo+ value F 12@31@200 assuming no impairmen! 6,000,000 Re"orded boo+ value
10,000,000 3,000,000
5,250,000
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 #""umula!ed depre"ia!ion 35,000,000 F 30,000,000
5,000,000
2. Depre"ia!ion #""umula!ed depre"ia!ion 30,000,000 @ 5 ),000,000
),000,000
5,000,000
Hbserve !ha! !he undis"oun!ed ne! "ash o(s from !he asse! amoun! !o P36,500,000 for 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 !he P#% 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 or more !han !he "arring amoun!. P#% 3) has !o!all re;e"!ed !he "on"ep! of undis"oun!ed "ash o(s for impairmen! purposes.
Problem 1,-22 1. Malue in use 1,500,000 ' 5.)5 2. mpairmen! loss #""mula!ed depre"ia!ion Buildings #""umula!ed depre"ia!ion 22,500,000 @ 20 ' ) ),650,000 Boo+ value F 1@1@200 $air value F +ig+er t+an value in u&e mpairmen! loss 3. Depre"ia!ion #""umula!ed depre"ia!ion 10,000,000 @ 10
,465,000 ,250,000 ,250,000 25,000,000
1,250,000 10,000,000 ,250,000
1,000,000 1,000,000
Problem 1,-23 1. Malue in use 00,000 ' 3.99 2. mpairmen! loss #""umula!ed depre"ia!ion 7a"hiner #""umula!ed depre"ia!ion Boo+ value F 1@1@200 Presen! value of "ash o(s F +ig+er t+an air value
3,192,000 30,000 30,000 5,000,000 1,500,000 3,500,000 3,192,000
mpairmen! loss
30,000
3. Depre"ia!ion #""umula!ed depre"ia!ion 3,192,000 @ 5
)3,400 )3,400
2'' Problem 1,-2 1. o!al "arring amoun! Malue in use mpairmen! loss
5,000,000 3,)00,000 1,400,000
2. mpairmen! loss allo"a!ed !o good(ill mpairmen! loss allo"a!ed !o !he o!her asse!s
500,000 900,000 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!. Building nven!or rademar+
Carr%ing amount 2,000,000 1,500,000 1,000,000 4,500,000
3. mpairmen! loss ood(ill #""umula!ed depre"ia!ion F building nven!or rademar+
$ra#tion 20@45 15@45 10@45
Lo&& 400,000 300,000 200,000 900,000
1,400,000 500,000 400,000 300,000 200,000
Problem 1,-2' 1. Carring amoun! Malue in use mpairmen! loss
1),000,000 11,000,000 5,000,000
2. Allo#ation o impairment lo&& Building @1) ' 5,000,000 2,500,000 &-uipmen! 4@1) ' 5,000,000 nven!or 4@1) ' 5,000,000
1,250,000 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 #llo"a!ed loss Reallo"a!ed loss 4@ ' 1,000,000 4@ ' 1,000,000 500,000 mpairmen! loss 3. mpairmen! loss #""umula!ed depre"ia!ion F building #""umula!ed depre"ia!ion F e-uipmen! nven!or
Building 2,500,000 1,000,000
Euipment 1,250,000
///////// 1,500,000
9nventor% 1,250,000
500,000 /////////
1,650,000
1,650,000
5,000,000 1,500,000 1,650,000 1,650,000
Problem 1,-26 #ll nimar!:s s!ores are in diOeren! lo"a!ions and probabl have diOeren! "us!omer pro*le. %o al!hough %mar! is managed a! !he "orpora!e level, %mar! genera!es "ash ino(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!ising are identiable for ea"h !i!le. n addi!ion, de"isions !o abandon !i!les are made on an individual 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 "ash genera!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 B and 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(s depend 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!mus Compan: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(s from !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 !he value in use of !he building based on !he "ash ino(s of rela!ed ren!.
Problem 1,-30 An&er C Cos!,
300,000 500,000 200,000 300,000
he loss is re"orded as follo(s> mpairmen! loss #""umula!ed depre"ia!ion Cos! #""umula!ed depre"ia!ion 300,000 J 300,000 Re"overable value,
300,000 300,000 00,000 )00,000 40,000 1)0,000
Problem 1,-31 An&er B $rom #ugus! 31, 2005 !o 7a 31, 200 is a period of 33 mon!hs. hus, !he remaining life of !he ma"hine is 26 mon!hs, )0 mon!hs original life minus 33. Depre"ia!ion for !he mon!h of
2') Cos! #""umula!ed depre"ia!ion F 5@31@200 3,200,000 F 500,000 ' 33@)0 Boo+ value F 5@31@200 $air value mpairmen! loss
3,200,000 1,45,000 1,615,000 1,350,000 3)5,000
Problem 1,-32 An&er B Cos! F
1,000,000 )40,000 490,000
Problem 1,-33 An&er C Boo+ value, 1@1@200 2,400,000 Depre"ia!ion for 200 1,)00,000 @ 4 400,000 Boo+ value, 12@31@200 %ales pri"e8re"overable value mpairmen! loss
2,000,000 )50,000 1,350,000
Problem 1,-3 An&er C Depre"ia!ion for 200 10E ' 2,000,000 Cos! F 1@2@2004 #""umula!ed depre"ia!ion 8 12@31@0 200,000 ' 5 1,000,000 Boo+ value812@31@200 &s!ima!ed "os! of disposal mpairmen! loss
Problem 1,-3' An&er C
200,000 2,000,000 1,000,000 50,000 1,050,000
Cos! #""umula!ed depre"ia!ion F 1@1@200 2,000,000 F 100,000 @ 10 ' 2.5 Boo+ value F 1@1@200 $air value mpairmen! loss
2,000,000 465,000 1,525,000 )00,000 925,000
Problem 1,-36 An&er C Cos! F 12@31@2004 2,00,000 #""umula!ed depre"ia!ion F @31@200 2,400,000 @ 9) mon!hs ' 44 1,100,000 Boo+ value F @31@200 1,600,000 $air value 1,500,000 mpairmen! loss 200,000
2', Problem 1,-3( An&er C Carring value 2,000,000 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 19,000,000 mpairmen! loss 1,000,000 Malue in use 2),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 Depre"ia!ion for 200 20E 1,400,000 Carring value F 12@31@200 Carring value F 12@31@200 assuming no impairmen! Reversal of impairmen! loss
6,000,000 5,)00,000 6,200,000 1,)00,000
260 CHAPTER 20 Problem 20-1 1. 2. 3. 4. 5.
D C D # D
). 6. . 9. 10.
D # D D B
Problem 20-2 1. 2. 3. 4. 5.
# # C D D
). B 6. B . D 9. D 10. D
Problem 20-3 200)
De". 31 #mor!ia!ion of pa!en! Pa!en! 255,000 @ 20 200, De". 31 #mor!ia!ion of pa!en! Pa!en! 2010
255,000 255,000 12,650 12,650 12,650 12,650 90,000 90,000
De". 31 #mor!ia!ion of pa!en! Pa!en! 2011
12,650 12,650 510,000 510,000
De". 31 #mor!ia!ion of pa!en! Pa!en!
42,650 42,650
Hn original "os! Hn "ompe!ing pa!en! 510,000 @ 16
12,650 30,000 42,650
Problem 20- 200) Resear"h and developmen! e'pense Cash
510,000
2011 Pa!en!
620,000
510,000
Cash
620,000
261 #mor!ia!ion of pa!en! 620,000 @ 1) Pa!en! 2012 Pa!en! Cash
#mor!ia!ion of pa!en! Pa!en!
45,000 45,000 540,000 540,000 1,000 1,000
Hn rela!ed pa!en! Hn "ompe!ing pa!en! 540,000 @ 15
45,000
3),000
1,000
Problem 20-' 200) Resear"h and developmen! e'pense Cash 200, Pa!en!
250,000 250,000 )0,000
Cash #mor!ia!ion of pa!en! Pa!en! )0,000 @ 10 2010
Pa!en! Cash
)0,000 ),000 ),000 )00,000 )00,000
Hriginal "os! ?e( pa!en! o!al "os! ess> #mor!ia!ion for 200 Balan"e F
Pa!en! (ri!!en oO Pa!en! Balan"e F 1@1@2010 ess> #mor!ia!ion 2010 2011 namor!ied "os!
)0,000 )00,000 ))0,000 ),000 )54,000 43,)00 43,)00 43,)00 43,)00 5)),00 5)),00 )54,000 43,)00 43,)00
6,200 5)),00
262 Problem 20-6 1. Pa!en! Cash
6,140,000 6,140,000
2. #mor!ia!ion of pa!en! Pa!en! 6,140,000 @ 15
46),000
3. #mor!ia!ion of pa!en! Pa!en! 5,612,000 @ 6 1),000
1),000
46),000
4. #"-uisi!ion "os! #mor!ia!ion for 2005, 200) and 2006 46),000 ' 3 Carring amoun! F 1@1@200 #mor!ia!ion for 200 Carring amoun! F 12@31@200
6,140,000 1,42,000 5,612,000 1),000 4,9),000
Problem 20-( 1. Pa!en! Cash 2. #mor!ia!ion of pa!en! Pa!en! 900,000 @ 10
900,000 900,000 90,000 90,000
3. Pa!en! (ri!!en oO Pa!en!
540,000 540,000
Cos! #mor!ia!ion for 2005, 200), 2006 and 200 90,000 ' 4 3)0,000 Carring amoun! F 12@31@200
900,000 540,000
Problem 20-) 1. Pa!en! Cash 2. egal e'penses Cash 3. #mor!ia!ion of pa!en! Pa!en!
),200,000 ),200,000 450,000 450,000 1,050,000 1,050,000
Q 1,200,000 @ L 2,000,000 @ 5 3,000,000 @ )
150,000 400,000 500,000 1,050,000
263 Problem 20-, 1. Re!ained earnings Pa!en!
500,000
2. Pa!en! Re!ained earnings
510,000
500,000 510,000
3. ?o ad;us!men!. 4. oss on damages egal e'pense #""rued liabili!ies
100,000 30,000
5. Pa!en! Re!ained earnings
24,500
130,000 24,500
#mor!ia!ion per boo+ 500,000 F 450,000 Corre"! amor!ia!ion for 2006 510,000 @ 20 Hveramor!ia!ion ). #mor!ia!ion of pa!en! Pa!en!
50,000 25,500 24,500 25,500 25,500
Problem 20-10 200) Coprigh! Cash
25,000 25,000
#mor!ia!ion of "oprigh! Coprigh!
150,000 150,000
25,000 @ 95,000 K 3 per "op 50,000 ' 3 K 150,000 200, #mor!ia!ion of "oprigh! Coprigh! 30,000 ' 3 90,000
90,000
Problem 20-11 1. Coprigh! Re!ained earnings
240,000 240,000
Cos! of "oprigh! ess> #mor!ia!ion 300,000 @ 5 Boo+ value 2. #mor!ia!ion of "oprigh! Coprigh!
300,000 )0,000 240,000 )0,000 )0,000
26 Problem 20-12 1. Coprigh! Pa!en! Re!ained earnings
)20,000 400,000 1,020,000
Coprigh! 1 ess> #mor!ia!ion from 1@1@2004 !o 12@31@2006 400,000 @ 20 ' 4 0,000 Boo+ value Coprigh! 2 ess> #mor!ia!ion from 6@1@2005 !o 12@31@2006 3)0,000 @ 15 ' 2.5 Boo+ value Pa!en! ess> #mor!ia!ion for 200) and 2006 500,000 @ 10 ' 2 100,000 Boo+ value 2. #mor!ia!ion of "oprigh! 20,000 J 24,000 #mor!ia!ion of pa!en! Coprigh! Pa!en!
Problem 20-13 Boo/& o $ran#+i&ee
400,000 320,000 3)0,000 )0,000 300,000 500,000 400,000
44,000 50,000 44,000 50,000
1. $ran"hise Cash
),000,000 ),000,000
2. #mor!ia!ion of fran"hise $ran"hise ),000,000 @ 20
300,000 300,000
3. Cash %ales
25,000,000
4. $ran"hise fee e'pense Cash 25,000,000 ' 5E
1,250,000
25,000,000 1,250,000
Problem 20-1 Boo/& o $ran#+i&ee
1. $ran"hise Cash ?o!e paable 2. ?o!e paable 15,000,000 @ 4 n!eres! e'pense 15,000,000 ' 10E Cash
20,000,000 5,000,000 15,000,000 3,650,000 1,500,000 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 Dis"oun! on no!e paable Cash ?o!e paable
),690,000 1,210,000 3,000,000 5,000,000
?o!e paable Presen! value of no!e 1,000,000 ' 3.69 3,690,000 mplied in!eres! 2. #mor!ia!ion of fran"hise $ran"hise ),690,000 @ 10 3. ?o!e paable Cash 4. n!eres! e'pense 10E ' 3,690,000 Dis"oun! on no!e paable
Problem 20-16
5,000,000 1,210,000 )69,000 )69,000 1,000,000 1,000,000 369,000 369,000
Reuirement a
1. easehold improvemen! F building Cash 2. Ren! e'pense 50,000 ' 12 Cash 3. Depre"ia!ion 5,000,000 @ 10 #""umula!ed depre"ia!ion
5,000,000 5,000,000 )00,000 )00,000 500,000 500,000
Reuirement b
#""umula!ed depre"ia!ion oss on leasehold "an"ela!ion easehold improvemen! F building
2,500,000 2,500,000 5,000,000
Problem 20-1( 1. Ren! e'pense Prepaid ren! Cash
1,200,000 1,200,000 2,400,000
266 2. easehold Cash
2,000,000 2,000,000
3. easehold improvemen! Cash
500,000
4. #mor!ia!ion of leasehold easehold 2,000,000 @ 5
400,000
5. Depre"ia!ion 500,000 @ 5 #""umula!ed depre"ia!ion
500,000 400,000 100,000 100,000
Problem 20-1) 1. easehold Cash
1,000,000
2. Ren! e'pense 150,000 ' 12 Cash
1,00,000
1,000,000 1,00,000
3. easehold improvemen! Cash
400,000
4. easehold improvemen! Cash
100,000
5. #mor!ia!ion of leasehold
100,000
400,000
100,000
easehold 1,000,000 @ 10 ). Depre"ia!ion #""umula!ed depre"ia!ion
100,000 )0,000 )0,000
400,000 @ 10 40,000 100,000 @ 5
20,000 )0,000
Problem 20-1, 1. Ren! e'pense Cash
)00,000
2. easehold Cash
100,000
3. easehold improvemen! Cash
200,000
4. easehold improvemen! Cash
50,000
)00,000 100,000 200,000 50,000
26( 5. #mor!ia!ion of leasehold easehold 100,000 @ 5
20,000
). Depre"ia!ion #""umula!ed depre"ia!ion
52,500
20,000 52,500
200,000 @ 5 50,000 @ 4
40,000 12,500 52,500
Problem 20-20 1. #mor!ia!ion of pa!en! #""umula!ed amor!ia!ion 1,920,000 F 240,000 @ )
20,000
2. rademar+ 00,000 ' 3@4 ?on"ompe!i!ion agreemen! Cash
)00,000 200,000
20,000
00,000
3. #mor!ia!ion of non"ompe!i!ion agreemen! #""umula!ed amor!ia!ion 200,000 @ 5
40,000
4. Roal! e'pense Cash
50,000
Problem 20-21
40,000
50,000
1. #"-uisi!ion "os! ?e! asse!s a"-uired ood(ill 2. Cash #""oun!s re"eivable nven!or Proper!, plan! and e-uipmen! ood(ill #""oun!s paable ?o!e paable F ban+ Cash
6,500,000 4,)00,000 2,900,000 50,000 00,000 1,350,000 4,300,000 2,900,000 900,000 1,000,000 6,500,000
Problem 20-22 1. #"-uisi!ion "os! ?e! asse!s a"-uired a! fair value ood(ill o!al asse!s a! fair value o!al liabili!ies ?e! asse!s a"-uired a! fair value
),000,000 3,300,000 2,600,000 5,300,000 2,000,000 3,300,000
26) 2. Cash #""oun!s re"eivable nven!or Pa!en! Proper!, plan! and e-uipmen! ood(ill #""oun!s paable Cash
50,000 500,000 1,500,000 250,000 3,000,000 2,600,000 2,000,000 ),000,000
Problem 20-23 1. Cash nven!or n8pro"ess R and D o!al asse!s o!al liabili!ies ?e! asse!s
#"-uisi!ion "os! ?e! asse!s a"-uired a! fair value ood(ill
1,000,000 500,000 5,000,000 ),500,000 3,000,000 3,500,000 ,000,000 3,500,000 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 nven!or n pro"ess R and D ood(ill
1,000,000 500,000 5,000,000 4,500,000
#""oun!s paable ?o!es paable Cash
2,)00,000 400,000 ,000,000
Problem 20-2 1. #verage earnings Divide b ?e! asse!s in"luding good(ill ess> ?e! asse!s before good(ill ood(ill 2. #verage earnings ess> ?ormal earnings E ' 1,600,000 13),000 &'"ess earnings Divide b ood(ill
250,000 10E 2,500,000 1,600,000 00,000 250,000 114,000 15E 6)0,000
26, 3. #verage earnings ess> ?ormal earnings 10E ' 1,600,000 160,000 &'"ess earnings 7ul!ipl b ood(ill
250,000
4. &'"ess earnings 7ul!ipl b ood(ill
0,000 5.)5 452,000
0,000 5 400,000
Problem 20-2' #verage earnings or prior ears 1,500,000 @ 3 n"rease in average earnings 10E ' 500,000 o!al ess> Pa!en! amor!ia!ion 500,000 @ 5 ears 100,000 &arnings for good(ill "ompu!a!ion a. #verage fu!ure earnings Divide b ?e! asse!s in"luding good(ill ess> ?e! asse!s e'"luding good(ill ood(ill b. #verage earnings ess> ?ormal earnings E ' 5,000,000 #verage e'"ess earnings
500,000 50,000 550,000
450,000 450,000 E 5,)25,000 5,000,000 )25,000 450,000 400,000 50,000
Divide b ood(ill ". ood(ill 50,000 ' 3.16
10E 500,000 15,500
Problem 20-26 a. #verage earnings &'pe"!ed in"rease 1,000,000 F 900,000 100,000 o!al ess> ?ormal earnings 4,00,000 ' 10E 40,000 &'"ess earnings
650,000 50,000 360,000
ood(ill 360,000 ' 4
1,40,000
%hareholders: e-ui! per boo+ ess> Re"orded good(ill ?e! asse!s before good(ill
5,000,000 200,000 4,00,000
b. ood(ill 360,000 @ 20E
1,50,000
2(0 Problem 20-2( 1. %hare "api!al Re!ained earnings o!al shareholders: e-ui! 3,500,000 ess> Re"orded good(ill ?e! asse!s before good(ill
2,000,000 1,500,000 1,000,000 2,500,000
#verage earnings 1,200,000 J 150,000 @ 3 ess> ?ormal earnings 10E ' 2,500,000 250,000 &'"ess earnings Divide b ood(ill
450,000 200,000 1)E 1,250,000
2. ?e! asse!s before good(ill ood(ill Pur"hase pri"e
2,500,000 1,250,000 3,650,000
Problem 20-2) 1. Malue in use ?e! asse!s in"luding good(ill a! "arring amoun! mpairmen! loss 4,000,000
3,000,000 42,000,000
2. mpairmen! loss ood(ill
4,000,000 4,000,000
Problem 20-2, 1. Malue in use ?e! asse!s in"luding good(ill a! "arring amoun! mpairmen! loss 15,000,000 2. mpairmen! loss ood(ill #""oun!s re"eivable nven!or #""umula!ed depre"ia!ion
)0,000,000 65,000,000
15,000,000 5,000,000 2,000,000 3,000,000 5,000,000
he remaining impairmen! loss of P10,000,000, af!er dedu"!ing !he loss appli"able !o good(ill, is allo"a!ed !o !he o!her non"ash asse!s on a prora!a basis.
Problem 20-30 1. Presen! value of inde*ni!e "ash o(s 200,000 @ 10E 2,000,000 rademar+ mpairmen! loss
),000,000 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 rademar+ ood(ill
6,410,000 4,000,000 3,410,000
Problem 20-31 1. o!al "arring amoun! Malue in use mpairmen! loss 2. mpairmen! loss ood(ill #""umula!ed depre"ia!ion F building 25@45 ' 260,000 nven!or 15@45 ' 260,000 rademar+ 5@45 ' 260,000
Problem 20-32
5,000,000 4,230,000 660,000 660,000 500,000 150,000 90,000 30,000
12@31@200 1@1@2009 6@1@2009 11@1@2009
R and D e'pense Cash
2,500,000
R and D e'pense Cash
1,200,000
R and D e'pense Cash
500,000
Pa!en!
350,000
2,500,000 1,200,000 500,000
Cash 11@15@2009
Pa!en!
350,000 00,000
Cash 12@31@2009
Pa!en!
00,000 100,000
Cash
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 Pa"+aging produ"! o!al inven!or
2,500,000 900,000 3,400,000
2. he "os!s in"urred from !he !ime of !e"hnologi"al feasibili! !o !he !ime (hen produ"! "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! H!her !es!ing "os!s af!er es!ablishmen! of !e"hnologi"al feasibili! Cos!s of produ"ing produ"! mas!ers for !raining ma!erials o!al "os!s !o be "api!alied 3. Comple!ion of de!ail program design Cos! in"urred for "oding and !es!ing !o es!ablish !e"hnologi"al feasibili! o!al "os!s "harged as e'pense
2,400,000 2,000,000 1,500,000 5,900,000 1,300,000 1,000,000 2,300,000
Problem 20-3 1. Designing and planning Code developmen! es!ing o!al R and D e'pense in 200
1,000,000 1,500,000 //500,000 3,000,000
he "os! of produ"ing !he produ"! mas!er of P2,500,000 is "api!alied as sof!(are "os! !o be subse-uen!l amor!ied. 2. Cos! of produ"ing !he sof!(are program in 2009 #mor!ia!ion of sof!(are "os! 2,500,000 @ 4 o!al e'pense in 2009
1,000,000 )25,000 1,)25,000
Problem 20-3' An&er C Cos! #""umula!ed amor!ia!ion from 2005 !o 2006 356,000 @ 15 ' 3 61,400 Boo+ value F 12@31@2006 #mor!ia!ion for 200 25,)00 @ 6 Boo+ value F 12@31@200
356,000 25,)00 40,00 244,00
Problem 20-36 An&er C Cos! 1@1@2003 #""umula!ed depre"ia!ion F 12@31@2006 ),000,000 @ 15 ' 5 Boo+ value F 1@1@200
),000,000 2,000,000 4,000,000
#mor!ia!ion for 200 4,000,000 @ 5 00,000
Problem 20-3( An&er C Cumula!ive earnings ess> ain on sale #d;us!ed "umula!ive earnings
550,000 50,000 500,000
2(3 #verage earnings 500,000 @ 5 Divide b "api!alia!ion ra!e ?e! asse!s in"luding good(ill 1,000,000 ess> ?e! asse!s before good(ill ood(ill
100,000 10E 650,000 250,000
Problem 20-3) An&er C ?e! asse!s 7ul!ipl b e'"ess ra!e 1)E minus 10E &'"ess earnings 7ul!ipl b presen! value fa"!or ood(ill
1,00,000 )E 10,000 3.26 353,1)0
Problem 20-3, An&er Pur"hase pri"e ess> ood(ill 500,000 ?e! asse!s before good(ill
5,000,000 4,500,000
&s!ima!ed annual earnings s-ueee ess> ?ormal earnings 4,500,000 ' 10E &'"ess or superior earnings Divide b "api!alia!ion ra!e ood(ill
550,000 450,000 100,000 20E 500,000
Problem 20-0 An&er C #""oun!s re"eivable nven!or &-uipmen! %hor!8!erm paable ?e! asse!s a! fair value
2,000,000 500,000 500,000 2,000,000 1,000,000
#"-uisi!ion "os! ?e! asse!s a! fair value ood(ill
5,000,000 1,000,000 4,000,000
Problem 20-1 An&er A Problem 20-2 An&er C Do(npamen! Presen! value of annual pamen! for 4 ears 1,000,000 ' 2.91 Cos! of fran"hise
2,000,000 2,910,000 4,910,000
2( Problem 20-3 An&er A Design "os!s egal fees of regis!ering !rademar+ Regis!ra!ion fee (i!h Pa!en! HA"e o!al "os! of !rademar+
1,500,000 150,000 50,000 1,600,000
Problem 20- An&er B Hriginal lease &'!ension o!al life ess> Lears e'pired 200) and 2006 Remaining life ears ife of improvemen! shor!er ears easehold improvemen! ess> Depre"ia!ion for 200 540,000 @ 15 Boo+ value
12 ears 20 2 1 15 540,000 3),000 504,000
Problem 20-' An&er Depre"ia!ion 3,)00,000 @ )
)00,000
Problem 20-6 An&er C Depre"ia!ion of e-uipmen! 7a!erials used Compensa!ion "os!s of personnel Hu!side "onsul!ing fees ndire"! "os!s allo"a!ed
135,000 200,000 500,000 150,000 250,000 1,235,000
Problem 20-( An&er A 7odi*"a!ion !o !he formula!ion of a "hemi"al produ"! Design of !ools, ;igs, molds and dies 160,000 abora!or resear"h o!al resear"h and developmen! e'pense
135,000 215,000 520,000
Problem 20-) An&er #ll "os!s are "harged !o R and D e'pense.
2(' Problem 20-, An&er A rademar+ Malue in use 120,000 @ )E mpairmen! loss Pa!en! #mor!ia!ion for 200 2,000,000 @ 5 400,000 Boo+ value F 12@31@200 Malue in use 500,000 ' 3.46 1,635,000 mpairmen! loss
3,000,000 2,000,000 1,000,000 2,000,000 1,)00,000 8/ /
Problem 20-'0 An&er B Carring amoun! of ne! asse!s Malue in use ,000,000 ' 1.5 12,000,000 mpairmen! loss F appli"able !o good(ill
1),000,000 4,000,000
