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AEC 118 - Assignment PPE

Case 1: Determine the acquisition cost for 4 assets purchased by Mentor Manufacturing Company, which include Machine A for P93,160, Machine B for P29,575, land exchanged for stock worth P67,500, and equipment under a deferred payment contract of P126,000. Case 2: Classify the acquisition costs of ABC Co's assets as property, plant and equipment in its year-end balance sheet. The total amount classified as PP&E is P14,750,000. Case 3: Calculate the initial cost of the PPE acquired by Bruce Dickenson, Inc. The initial cost is P2,550,000.

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11 views

AEC 118 - Assignment PPE

Case 1: Determine the acquisition cost for 4 assets purchased by Mentor Manufacturing Company, which include Machine A for P93,160, Machine B for P29,575, land exchanged for stock worth P67,500, and equipment under a deferred payment contract of P126,000. Case 2: Classify the acquisition costs of ABC Co's assets as property, plant and equipment in its year-end balance sheet. The total amount classified as PP&E is P14,750,000. Case 3: Calculate the initial cost of the PPE acquired by Bruce Dickenson, Inc. The initial cost is P2,550,000.

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Roi Peñales
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AEC 118 – INTERMEDIATE ACCOUNTING I

Assignment _Property, Plant and Equipment

Instructions: Provide what is being asked in each case. Write your answers in your activity notebook.

Case 1.
One of the most critical steps in recording the acquisition of assets is the determination of the cost assigned to
the asset. Data related to assets acquired by Mentor Manufacturing Company are as follows:
(1) Machine A was purchased at a list price of P92,000; terms 1/10, net 30. The machine invoice was paid after
the discount period. Transportation charges were P1,270; installation costs
were P920; and the cost of a trial run was P960. Normal repairs and maintenance for the first year were P410.
(2) Machine B could be purchased for five annual payments of P6,332 or P29,400 in cash. Mentor elected to
purchase Machine B under the installment plan. Other related acquisition costs totaled P175.
(3) On June 29, 2,125 shares of Mentor common stock were issued in exchange for land. The par value of the
stock was P20 per share; the market value of the stock was P32 per share at the
time of purchase.
(4) The company purchased equipment under a deferred payment contract--
P40,000 down payment and – 30 semiannual payments of P5,000. (Assume a 12 percent interest rate.)

Requirement: Determine the acquisition cost for each of the assets.

Case 2.
ABC Co. has the following assets as of year-end.
 Land held for appreciation 3,600,000
 Manufacturing equipment purchased under installment basis 3,000,000
 Patents 400,000
 Land used in business 5,000,000
 Land held for resale 2,200,000
 Building owned, used as warehouse 1,500,000
 Servicing equipment - used in building maintenance;
estimated to have a 20-year useful life 3,000,000
 Small tools and minor spare parts used in equipment
maintenance, with average useful life of one year 200.000
 Safety and environmental equipment - required for
 ISO and DEN accreditation 450,000

Requirement: How much would be classified as property, plant and equipment in the Company's year-end
balance sheet?

Case 3.

Bruce Dickenson, Inc. acquired an item of PPE at the beginning of the year. The invoice price is P2,500,000
subject to a prompt discount of 3% which was not taken. Necessary installation costs amounted to P50,000.
Legislation requires that Bruce decommission the asset at the end of the asset's useful life of 10 years.
Decommission costs amount to P200,000. The rate current as of acquisition date is 12%.

Requirement: How much is the initial cost of the PPE?

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