(Problem 1) The property, plant and equipment section of L Company’s Statement of Financial Position at December 31,

2019 included the following items:

Land 2,100,000 Buildings 3,600,000
Land improvements 560,000 Machinery and equipment 6,600,000

During 2020, the following data were available to you upon your analysis of the accounts:
Cash paid on purchase of land 10,000,000
Mortgage assumed on the land bought, including interest at 16% 16,000,000
Realtor’s commission 1,200,000
Legal fees, realty taxes and documentation expenses 200,000
Amount paid to relocate persons squatting on the property 400,000
Cost of tearing down an old building on the land 300,000
Amount recovered from the salvage of the building demolished 200,000
Cost of fencing the property 440,000
Amount paid to a contractor for the building constructed 8,000,000
Building permit fees 50,000
Excavation expenses 250,000
Architect’s fee 100,000
Interest that would have been earned had the money used during
the period of construction been invested in the money market 600,000
Invoice cost of machinery acquired 8,000,000
Freight, unloading and delivery charges 240,000
Customs duties and other charges 560,000
Allowances, hotel accommodations, etc.,
paid to foreign technicians during installation and test run of machines 1,600,000
Royalty payment on machines purchased (based on units produced and sold) 480,000

Based on the above and the result of your audit, compute the audited balances of the following as of December 31, 2020:
1. Land 2. Land improvements 3. Building 4. Machinery and equipment

(Problem 2) F Company’s property, plant and equipment balances at December 31, 2019 are:
Cost Accumulated depreciation
Machinery and equipment 1,380,000 367,500
Automobiles and trucks 210,000 114,326
Leasehold improvements 432,000 108,000

Depreciation policy:
a. Depreciation methods and useful lives
- Machinery and equipment: straight line, 10 years
- Automobiles and trucks: 150% declining balance, 5 years
- Leasehold improvements: straight line
b. Depreciation is computed to the nearest month
c. Salvage values are immaterial except for automobiles and trucks which have estimated salvage values equal to 15% of
cost.

Additional information:
a. F entered into a 12-year operating lease starting January 1, 2017. The leasehold improvements were completed on
December 31, 2016 and the facility was occupied on January 1, 2017.
b. On July 1, 2020, machinery and equipment were purchased at a total invoice cost of 325,000. Installation cost of 44,000
was incurred.
c. On August 30, 2020, F purchased new automobile for 25,000.
d. On September 30, 2020, a truck with a cost of 48,000 and a carrying amount of 30,000 on December 31, 2019 was sold
for 23,500.
e. On December 20, 2020, a machine with a cost of 17,000, a carrying amount of 2,975 on date of disposition, was sold
for 4,000.

Based on the above and the result of your audit, answer the following;
1. The gain on sale of truck on September 30
2. The gain on sale of machinery on December 20, 2020
3. The adjusted balance of the property, plant and equipment as of December 31, 2020
4. The total depreciation expense for the year ended December 31, 2020
5. The carrying amount of the property, plant and equipment as of December 31, 2020 is
(Problem 3) On January 1, 2016, Kazoo Company acquired a factory equipment at a cost of 150,000. The equipment is
being depreciated using the straight-line method over its projected useful life of 10 years. On December 31, 2017, a
determination was made that the asset’s recoverable amount was only 96,000. Assume that this was properly computed
and that recognition of the impairment was warranted. On December 31, 2018, the asset’s recoverable amount was
determined to be 111,000 and management believes that the impairment loss previously recognized should be reversed.
You have been asked to assist the company’s accountant in the application of PAS 36, the standard on impairment of
assets.

1. What amount of impairment loss should be recognized on December 31, 2017?

a. 54,000 b. 9,000 c. 24,000 d. P0

2. What is the asset’s carrying value on December 31, 2018?

a. 84,000 b. 90,000 c. 86,400 d. 96,000

3. What would have been the asset’s carrying amount at December 31, 2018, had the impairment not been recognized in
2017?
a. 105,000 b. 84,000 c. 96,000 d. 86,400

4. What amount of impairment recovery should be reported in the 2018 income statement?
a. 27,000 b. P0 c. 6,000 d. 21,000

(Problem 4) Mina Mining Co. has acquired a track of mineral land for 50,000,000. Mina Mining estimates that the
acquired property will yield 150,000 tons of ore with sufficient mineral content to make mining and processing profitable.
It further estimates that 7,500 tons of ore will be mined the first and last year and 15,000 tons every year in between
(assume 11 years of mining operations). The land will have a residual value of 1,550,000.

Mina Mining builds necessary structures and sheds on the site at a total cost of 12,000,000. The company estimates that
these structures can be used for 15 years but because they must be dismantled if they are to be moved, they have no
residual value. Mina Mining does not intend to use the buildings elsewhere.

Mining machinery installed at the mine was purchased second hand at a total cost of 3,600,000. The machinery cost the
former owner 9,000,000 and was 50% depreciated purchased. Mina Mining estimates that about half of this machinery
will still be useful when the present mineral resources have been exhausted but that dismantling and removal costs will
just about offset its value at the time. The company does not intend to use the machinery elsewhere. The remaining
machinery will last until about one-half the present estimated mineral ore has been removed and will then be worthless.
Cost is to be allocated equally between these two classes of machinery.

1. What are the estimated depletion and depreciation charges for the 1st year?
Depletion Depreciation
a. 4,845,000 870,000
b. 4,845,000 780,000
c. 2,422,500 870,000
d. 2,422,500 780,000

2. What are the estimated depletion and depreciation charges for the 5th year?
Depletion Depreciation
a. 2,422,500 1,740,000
b. 2,422,500 1,560,000
c. 4,845,000 1,560,000
d. 4,845,000 1,740,000

3. What are the estimated depletion and depreciation charges for the 6th year?
Depletion Depreciation
a. 2,422,500 1,560,000
b. 2,422,500 1,740,000
c. 4,845,000 1,560,000
d. 4,845,000 1,740,000
4. What are the estimated depletion and depreciation charges for the 7th year?
Depletion Depreciation
a. 2,422,500 1,380,000
b. 2,422,500 1,560,000
c. 4,845,000 1,380,000
d. 4,845,000 1,560,000

5. What are the estimated depletion and depreciation charges for the 11th year?
Depletion Depreciation
a. 4,845,000 1,380,000
b. 4,845,000 690,000
c. 2,422,500 1,380,000
d. 2,422,500 690,000

(Problem 5) On January 1, 2017, Afternoon Corporation acquires two assets within the same class of plant and equipment.
Information on these assets follows:
Cost Expected useful life
Machine A 100,000 5 years
Machine B 60,000 3 years

The machines are expected to generate benefits evenly over their useful lives. The class of plant and equipment is
measured using the revaluation model.

At December 31, 2017, information about the assets follows:

Fair value Expected useful life
Machine A 84,000 4 years
Machine B 38,000 2 years

On July 1, 2018, machine B was sold for 32,000 cash. On the same day, Afternoon Corporation acquired machine C for
80,000 cash. Machine C has expected useful life of 4 year.

At December 31, 2018, information about the assets follows:

Fair value Expected useful life
Machine A 61,000 3 years
Machine C 68,500 1.5 years

Based on the above and the result of your audit, answer the following:
1. The amount to be recognized in 2017 profit or loss related to the revaluation of the assets is
a. 4,000 b. 2,000 c. (2,000) d. P0

2. The amount to be recognized in 2017 comprehensive income related to the revaluation of the assets is
a. 4,000 b. 2,000 c. (2,000) d. 17,000

3. The gain or loss on sale of Machine B is

a. 13,000 gain b. 3,500 gain c. 333 gain d. 6,000 loss

4. The total depreciation for the year 2018 is

a. 40,500 b. 31,000 c. 64,167 d. 50,500

5. The amount to be recognized in 2018 profit or loss related to the revaluation of the assets is
a. (3,500) b. (1,500) c. (500) d. P0