STEPHANIE DEANNE E.

LUMAKANG INTERMEDIATE ACCOUNTING 1

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Problem 23-1, page 650; Erica Company

Required:

# Particulars Debit Credit

1. Land P 6,000,000
Share Capital (50,000 x P100) P 5,000,000
Share Premium (50,000 x P120 – P5M) 1,000,000

2. Land 1,000,000
Donated Capital 1,000,000

Donated Capital 50,000

Cash 50,000

3. Land (P 5,500,000 x 2/5) 2,200,000

Building (P 5,500,000 x 3/5) 3,300,000
Cash 5,500,000

4. Land (P 10,000,000 x 40%) 4,000,000

Building (P 10,000,000 x 60%) 6,000,000
Cash 7,500,000
Mortgage Payable 2,500,000

Problem 23-3, page 651; Enrich Company

Given:
a. P 100,000 down payment
b. Four annual payments of P 200,000, the first installment note to be paid on December 31,2020

Present Value of 1 .683

Present Value of Ordinary Annuity of 1 3.170
Required:
2020
Date Particulars Debit Credit
January 1 Machinery P734,000
Discount on Note Payable 166,000
Cash P 100.000
Note Payable 800,000
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2021
Date Particulars Debit Credit
December 31 Note Payable 200,000
Cash 200,000

Interest Expense 49,740

Discount on Note Payable 49,740

Solution:
Down payment P 100,000
PV of Note 634,000
Total Cost P 734,000
Date Annual Payments Interest of 10% Principal Present Value
January 1, 2020 P 634,000
Problem
December23-6,
31, page
2020 654; Cherish
200,000 Company 63,400 136,600 497,400
Required:
December 31, 2021 200,000 49,740 150,260 347,140
December 31, 2022 200,000 34,714 165,286 181,854
December 31, 2023 200,000 18,146 181,854 ---
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# Particulars Debit Credit

1. Computer P 430,000
Cash P50,000
Car Vehicle 300,000
Gain on Exchange 80,000

2. Machinery- new 140,000

Accumulated Depreciation 120,000
Loss on exchange 10,000
Machinery- old 240,000
Cash 30,000

3. Equipment- new 1,000,000

Accumulated Depreciation 1,800,000
Loss on exchange 200,000
Equipment-old 3,000,000

Solution:
FV of asset P 110,000
Carrying amount 120,000
Loss on exchange (P 10,000)

Problem 23-10, page 656; Gratitude Company

Given:
Total Finished Goods Building
Direct Labor P 6,000,000 P 4,200,000 P 1,800,000
Materials 7,000,000 3,000,000 4,000,000
Overhead 2,000,000 ? ?
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Required:
1. No overhead is to be assigned to the building.
Total Finished Goods Building
Direct Labor P 6,000,000 P 4,200,000 P 1,800,000
Materials 7,000,000 3,000,000 4,000,000
Overhead 2,000,000 2,000,000 ---
P 15,000,000 P 9,200,000 P 5,800,000

2. The building is to be charged with the overhead which would have been charged to the 45,000 units which were
not produced.
Total Finished Goods Building
Direct Labor P 6,000,000 P 4,200,000 P 1,800,000
Materials 7,000,000 3,000,000 4,000,000
Overhead 2,000,000
P2,000,000 x 135/180 1,500,000
P2,000,000 x 45/180 500,000
P 15,000,000 P 8,700,000 P 6,300,000

3. Overhead is to be apportioned in the ratio of direct labor.

Total Finished Goods Building

Direct Labor P 6,000,000 P 4,200,000 P 1,800,000
Materials 7,000,000 3,000,000 4,000,000
Overhead 2,000,000
ProblemP2,000,000
25-4, page 703; Molave Company
x 42/60 1,400,000
Given: P2,000,000 x 18/60 600,000
P 15,000,000 P 8,600,000 P 6,400,000
Specific Construction Loan P 3,000,000 10%
General Loan 25,000,000 12%

January 1,2020 P 4,000,000

April 1, 2020 5,000,000
December 1, 2020 3,000,000
March 1, 2021 6,000,000
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Requirement:
1. Cost of the new building.
Computation for 2020
Expenditures Fraction Average
January 1,2020 P 4,000,000 12/12 P 4,000,000
April 1, 2020 5,000,000 9/12 3,750,000
December 1, 2020 3,000,000 1/12 250,000
P 12,000,000 P 8,000,000

Average expenditures in 2020 P 8,000,000

Applicable to specific loan (3,000,000)
Applicable to general loan P 5,000,000

Actual expenditures in 2020 P 12,000,000

Capitalizable borrowing cost in 2020:
Specific (3,000,000 x 10%) 300,000
General (5,000,000 x 12%) 600,000
Total Cost of New Building to Date- December 31,2020 P 12,900,000

Computation for 2021

Expenditures Fraction Average
January 1,2021 P 12,900,000 6/6 P 12,900,000
March 1, 2021 6,000,000 4/6 4,000,000
P 18,900,000 P 16,900,000
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Average expenditures in 2021 P 16,900,000

Applicable to specific loan (3,000,000)
Applicable to general loan P 13,900,000

Cumulative Actual expenditures in 2021 P 18,900,000

Capitalizable borrowing cost in 2020:
Specific (3,000,000 x 10% x 6/12) 150,000
General (13,900,000 x 12% x 6/12) 834,000
Total Cost of New Building to Date- June 30,2021 P 19,884,000

2. Compute the interest expense for 2020 and 2021.

Actual Interest on general borrowing- 2020 (25,000,000 x 12%) P 3,000,000
Capitalized Interest on general borrowing in 2020 (600,000)
Interest Expense- 2020 P 2,400,000

Actual Interest on specific borrowing- 2021 (3,000,000 x 10%) P 300,000

Actual Interest on general borrowing- 2021 (25,000,000 x 12%) 3,000,000
Total Interest incurred for 2020 P 3,300,000
Less: Total Capitalized interest for 2020 (150,000 + 834,000) 984,000
Interest Expense- 2021 P 2,316,000

Problem 26-22, page 748; Scarce Company

Given:
Machinery
STEPHANIE DEANNE E. LUMAKANG INTERMEDIATE ACCOUNTING 1
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Cost of dismantling old machine P 20,000 Cash proceeds from sale of old machine P 14,000
Raw materials used P 600,000 Depreciation for 2020 (P 1,286,000 x 10%) 128,600
Labor in construction 400,000
Cost of installation 60,000
Materials spoiled in trial run 30,000
Profit on construction 100,000
Purchase of machine tools 90,000

Required:
a. Cost of the machinery.
Raw material used P 600,000
Labor in construction 400,000
Cost of installation 60,000
Materials spoiled in trial run 30,000
Purchase discount (40,000)
Exceeded Overhead 150,000
Cost of Machinery P 1,200,000

b. Adjusting entries
# Particulars Debit Credit
1. Loss on retirement of old machinery P 6,000
Machinery (20,000 – 14,000) P 6,000

2. Purchase Discount 40,000

Machinery 40,000

3. Machinery 150,000
Factory Overhead 150,000

4. Profit on Construction 100,000

Machinery 100,000
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5. Machine tools 90,000

Machinery 90,000

Depreciation- machine tools 10,000

Machine Tools 10,000

6. Machinery 128,600
Accumulated depreciation 40,000
Depreciation- machinery 88,600

Depreciation P 128,600
Corrected depreciation (P 1,200,000 x 10% x 4/12) 40,000
Over depreciation P 88,000

Problem 26-24, page 748; Mundane Company

Required:

# Particulars Debit Credit

1. Building P 10,500,000
Cash P 10,500,000
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2. Depreciation 200,000
Accumulated Depreciation 200,000

3. Building 3,000,000
Cash 3,000,000

Loss on retirement of building 2,400,000

Accumulated depreciation (P 2,500,000/50 years 100,000
x 20)
Cash 2,500,000

4. Depreciation (P10.7M - 500,000/48) 212,500

Accumulated depreciation 212,500

Building (P10,500,000 + 3M – 2.5M) P 11,000,000

Accumulated Depreciation (400,000 – 100,000) 300,000
Carrying Amount P 10,700,000

Annual Depreciation (P10.7M – 500,000 /48 years remaining) P 212,500

Problem 27-1, page 787; Amicable Company

Given:
Machinery P635,000 P35,000 residual value
Estimated life of 5 years, 60,000 service hours and 150,000 production units.
Actual Operations Service Hours Unit Produced
2020 14,000 34,000
2021 13,000 32,000
2022 10,000 25,000
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2023 11,000 29,000

2024 12,000 30,000
Required:
a. Straight Line
Year Particular Depreciation Accumulated Carrying Amount
Depreciation
Acquisition Cost P 635,000
1 Depreciation for first year P 120,000 P 120,000 515,000
2 Depreciation for second year 120,000 240,000 395,000
3 Depreciation for third year 120,000 360,000 275,000
4 Depreciation for fourth year 120,000 480,000 155,000
5 Depreciation for fifth year 120,000 600,000 35,000
P600,000
b. Service Hours
Accumulated
Year Particular Depreciation Carrying Amount
Depreciation
Acquisition Cost P 635,000
1 14,000 x 10 P 140,000 P 140,000 495,000
2 13,000 x 10 130,000 270,000 365,000
3 10,000 x 10 100,000 370,000 265,000
4 11,000 x 10 110,000 480,000 155,000
5 12,000 x 10 120,000 600,000 35,000
c. Production Method
P600,000 Accumulated
Year
Depreciation Particular
Rate per hour- P 600,000/ 60,000= 10 Depreciation Carrying Amount
Depreciation
Acquisition Cost P 635,000
1 34,000 x 4 P 136,000 P 136,000 499,000
2 32,000 x 4 128,000 264,000 371,000
3 25,000 x 4 100,000 364,000 271,000
4 29,000 x 4 116,000 480,000 155,000
5 30,000 x 4 120,000 600,000 35,000
P600,000
Depreciation Rate per hour- P 600,000/ 150,000= 4
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Problem 27-3, page 788; Definite Company

Given:
Cost Residual value Useful Life in Years
Machinery P 310,000 P 10,000 5
Office Equipment 110,000 10,000 10
Building 1,600,000 100,000 15
Delivery Equipment 430,000 30,000 4

Required:
a. Composite Depreciation Rate = P 270,000 / P 2,450,000 = 11.02%
b. Composite Life = P 2,300,000 / P270,000 = 8.52 years
c.
# Particulars Debit Credit
Depreciation P270,000
Accumulated Depreciation P270,000
Solution:
Depreciation Annual
Cost Salvage Life in Years
Cost Depreciation
Machinery P 310,000 P 10,000 P 300,000 5 P 60,000
Office Equipment 110,000 10,000 100,000 10 10,000
Building 1,600,000 100,000 1,500,000 15 100,000
Delivery Equipment 430,000 30,000 400,000 4 100,000
P 2,450,000 P 2,300,000 P 270,000

Problem 27-26, page 799; Vicious Company

Given:
STEPHANIE DEANNE E. LUMAKANG INTERMEDIATE ACCOUNTING 1
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Cost Accumulated Depreciation Useful Life in Years

Land P 350,000 --
Land improvements 180,000 45,000 15
Building 4,500,000 1,050,000 20
Machinery and Equipment 1,160,000 405,000 10
Automobiles 1,800,000 1,344,000 3
Required;
1. Depreciation of land improvements
P 180,000 / 15 years = P 12,000
2. Depreciation of building
Straight Line Rate (100% / 20 years) 5%
Fixed Rate (150% x 5%) 7.5%
P 4,500,000 – P1,050,000 x 7.5%) P 258,750
3. Depreciation machinery and equipment
Cost of Asset (P1,160,000 – 60,000 / 10) P 110,000
(P300,000/ 10) 30,000
(P 60,000 / 10 x 6/12) 3,000
P143,000
4. Depreciation of automobiles
Problem 29-1, page 849; Hilarious Company
Straight Line Rate (100% / 3 years) 33%
Given:
Fixed Rate (150% x 33%) 50%
P 1,800,000 – P1,344,000 x 50%) Cost P 228,000Replacement Cost
Machinery P 4,500,000 P 7,200,000
Accumulated Depreciation 900,000
Age of Asset 3 years

Required:
1. Original useful life
Accumulated depreciation-cost P 900,000 Machinery at cost P4,500,000
Divide by age of the machinery 3 years Divide by annual depreciation on cost 300,000
Annual depreciation P 300,000 Original Useful Life 15 years
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2. Record the revaluation.

# Particulars Debit Credit
Machinery P2,700,000
Accumulated Depreciation P 540,000
Revaluation Surplus 2,160,000

Cost P4,500,000 Sound Value P 5,760,000

Accumulated Depreciation (900,000) Carrying Amount (3,600,000)
Carrying Amount P 3,600,000 Revaluation Surplus P 2,160,000

Replacement cost P 7,200,000 Replacement cost P 7,200,000

Cost (4,500,000) 80%
Appreciation P 2,700,000 Accumulated Depreciation on P1,440,000
replacement cost
Replacement cost P 7,200,000
Accumulated Depreciation 80%
Sound Value P 5,760,000
Cost Replacement Cost Appreciation
Machinery P 4,500,000 P7,200,000 P 2,700,000
Accumulated Depreciation 900,000 1,440,000 540,000
CA/SV/RS P 3,600,000 P 5,760,000 P2,160,000

3. Annual depreciation subsequent to the revaluation

# Particulars Debit Credit
Depreciation (P 5,760,000 / 12) P 480,000
Accumulated Depreciation P 480,000
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Depreciation on cost (P3,600,000 / 12) P 300,000

Depreciation on appreciation (P2,160,000 / 12) 180,000
Depreciation on revalued amount P 480,000

4. Piecemeal realization of the revaluation surplus

# Particulars Debit Credit
Revaluation surplus (P2,160,000 / 12) P 180,000
Retained Earnings P180,000