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    Jayson Cerrado
    Licab, Inc. had several plant assets as of December 31, 2019. In 2020: - Asset L was sold for a $10,250 gain. - Asset A was used for 5,250 hours, triggering depreciation. - Asset R's useful life was adjusted to 10 years remaining. - An error was discovered where Asset S, costing $55,000, was fully expensed in 2019 but should have been capitalized with a 10-year life. Llanera Corporation also had several property dispositions in 2020: - Land was condemned for a $3.72M gain - The building was demolished for a $432,000 gain -

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    Ppe Quiz

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    Jayson Cerrado
    385 views4 pages
    Licab, Inc. had several plant assets as of December 31, 2019. In 2020: - Asset L was sold for a $10,250 gain. - Asset A was used for 5,250 hours, triggering depreciation. - Asset R's useful life was adjusted to 10 years remaining. - An error was discovered where Asset S, costing $55,000, was fully expensed in 2019 but should have been capitalized with a 10-year life. Llanera Corporation also had several property dispositions in 2020: - Land was condemned for a $3.72M gain - The building was demolished for a $432,000 gain -

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    Licab, Inc. had several plant assets as of December 31, 2019. In 2020: - Asset L was sold for a $10,250 gain. - Asset A was used for 5,250 hours, triggering depreciation. - Asset R's useful life was adjusted to 10 years remaining. - An error was discovered where Asset S, costing $55,000, was fully expensed in 2019 but should have been capitalized with a 10-year life. Llanera Corporation also had several property dispositions in 2020: - Land was condemned for a $3.72M gain - The building was demolished for a $432,000 gain -

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    385 views4 pages

    Ppe Quiz

    Uploaded by

    Jayson Cerrado
    Licab, Inc. had several plant assets as of December 31, 2019. In 2020: - Asset L was sold for a $10,250 gain. - Asset A was used for 5,250 hours, triggering depreciation. - Asset R's useful life was adjusted to 10 years remaining. - An error was discovered where Asset S, costing $55,000, was fully expensed in 2019 but should have been capitalized with a 10-year life. Llanera Corporation also had several property dispositions in 2020: - Land was condemned for a $3.72M gain - The building was demolished for a $432,000 gain -

    Copyright:

    © All Rights Reserved
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    of 4

    PROBLEM NO.

    1
    The following data relate on the Plant Assets account of Licab, Inc. at
    December 31, 2019:
    Plant Assets
    L A R E
    Original cost P87,500 P127,500 P200,000 P200,000
    Year Purchased 2000 2001 2002 2004
    Useful life 10 years 37,500 hours 15 years 10 years
    Salvage value P7,750 P7,500 P12,500 P12,500
    Depreciation SYD Activity Straight-line Double-
    method declining
    balance
    Note: In the year an asset is purchased, Licab, Inc. does not record
    any depreciation expense on the asset.
    In the year an asset is retired or traded in, Licab, Inc. takes a full year
    depreciation on the asset.

    The following transaction occurred during 2020: (a)


    On May 5, Asset L was sold for P32,500 cash.

    (b) On December 31, it was determined that asset A had been used 5,250
    hours during 2020.

    (c) On December 31, before computing depreciation expense on Asset R,


    the management of Licab, Inc. decided the useful life remaining from
    1/1/2020 was 10 years.

     
    (d) On December 31, it was discovered that a plant asset purchased in
    2019 had been expensed completely in that year. This asset costs P55,000
    and has useful life of 10 years and no salvage value. Management has
    decided to use the double-declining balance for this asset, which can be
    referred to as “Asset S.”

    QUESTIONS:

    Based on the above and the result of your audit, answer the following:
    (Disregard tax implications)
    1. How much is the gain or loss on sale of Asset L?
    a. P10,250 loss c. P16,050 gain
    b. P10,250 gain d. P16,050 loss
    2. How much is the depreciation of Asset R for 2020?
    a. P15,000 c. P16,250
    b.P21,429 d. P23,214
    3. The adjusting entry to correct the error of failure to capitalize Asset S
    would include a debit/credit to Retained Earnings of
    a. P55,000 debit c. P44,000 credit
    b. P55,000 credit d. P 0
    4. How much is the adjusted balance of Plant Assets as of December 31,
    2020?
    a. P670,000 c. P615,000
    b. P527,500 d. P582,500
    5. How much is the total depreciation expense for 2020?
    a. P83,300 c. P82,050
    b. P88,479 d. P80,600

     
    PROBLEM NO. 2
    Your audit of Llanera Corporation for the year 2020 disclosed the following
    property dispositions:
    Cost Acc. Dep. Proceeds Fair value
    Land P4,800,000 - 3,720,000 3,720,000
    Building 1,800,000 - 288,000 -

    Cost Acc. Dep. Proceeds Fair value


    Warehouse 8,400,000 1,320,000 8,880,000 8,880,000
    Machine 960,000 384,000 108,000 864,000
    Delivery truck 1,200,000 570,000 564,000 564,000

    Land
    On January 15, a condemnation award was received as consideration for the
    forced sale of the company’s land and building, which stood in the path of a new
    highway.

    Building
    On March 12, land and building were purchased at a total cost of P6,000,000, of
    which 30% was allocated to the building on the corporate books. The real estate
    was acquired with the intention of demolishing the building, and this was
    accomplished during the month of August. Cash proceeds received in
    September represent the net proceeds from demolition of building.

    Warehouse
    On July 4, the warehouse was destroyed by fire. The warehouse was purchased
    on January 2, 2000. On December 12, the insurance proceeds and other funds
    were used to purchase a replacement warehouse at a cost of P7,200,000.

    Machine
    On December 15, the machine was exchanged for a machine having a fair value
    of P756,000 and cash of P108,000 was received.

    Delivery Truck
    On November 13, the delivery truck was sold to a used car dealer.

     
    QUESTION:

    Based on the above and the result of your audit, compute the gain or loss to be
    recognized for each of the following dispositions:
    1. Land
    a. P3,720,000 gain c. P4,800,000 loss
    b. P1,080,000 loss d. P 0
    2. Building
    a. P 432,000 gain c. P1,368,000 loss
    b. P2,232,000 loss d. P 0
    3. Warehouse
    a. P1,800,000 gain c. P5,400,000 loss
    b. P 480,000 gain d. P 0
    4. Machine
    a. P36,000 gain c. P288,000 gain
    b. P27,000 gain d. P 0
    5. Delivery truck
    a. P636,000 loss c. P66,000 loss
    b. P636,000 gain d. P66,000 gain

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