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PPE-sample-problems

Shiba Company has a total ending balance of P5,600,000 for its PPE as of December 31, 2024, with various assets including machinery, land, and vehicles. The adjusted value of the PPE is calculated to be P3,500,000 after correcting for errors in asset classification. Additionally, Si Company acquired properties worth a total of P2,370,000 in 2024, including machinery, equipment, and land.

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7 views

PPE-sample-problems

Shiba Company has a total ending balance of P5,600,000 for its PPE as of December 31, 2024, with various assets including machinery, land, and vehicles. The adjusted value of the PPE is calculated to be P3,500,000 after correcting for errors in asset classification. Additionally, Si Company acquired properties worth a total of P2,370,000 in 2024, including machinery, equipment, and land.

Uploaded by

sheilaoarujac
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as XLSX, PDF, TXT or read online on Scribd
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Shiba Company has an ending balance of P5,600,000 for its PPE as of December 31, 2024.

It is composed of the following:


1. A machinery with a book value of 1,500,000. The fair value of the said machinery is 2,000,000
2. Supplies to be used for the maintenance of the machinery 100,000 (recorded as machinery)
3. Land held for sale on normal course of business 1,200,000
4. Land held for capital appreciation 800,000
5. Land used as plant site 1,000,000
6. Current construction cost of an unfinished building 600,000
7. Motor vehicles used for administrative purposes 400,000

1. What is the adjusted value of the PPE of Shiba Company?


2. What is the adjusting entry to correct the errors?

1
Machinery at book value 1,500,000.00
Land used as plant site 1,000,000.00
Construction in progress 600,000.00
Motor vehicles 400,000.00
Total 3,500,000.00

2
Supplies 100,000.00
Merchandise Inventory 1,200,000.00
Investment Property 800,000.00
Machinery 100,000.00
Land 2,000,000.00
The following are related to the cost for the newly constructed office building:
Direct materials purchased 500,000.00
Direct labor 300,000.00
Variable overhead 47.3625% of direct materials used
Fixed overhead excluding interest 200,000.00

Additional information:
1. Unused materials for the construction of the building amounting 100,000
2. Direct labor includes the salary of the office supervisor overseeing the construction amounting to 50,000
3. 40% of the fixed overhead is applicable to the cost of construction.
4. A loan was made intended for the construction of the building. Total interest for the loan is 20,000 in which 5,000 was incur
5. A freight in of 40,000 was not included in the cost of the direct materials.

What is the total cost of the constructed PPE?


Direct materials:
DM used 400,000.00
Freight in for DM used 32,000.00 432,000.00

Direct labor 250,000.00

Overhead:
Variable 204,606.00
Fixed 80,000.00
Interest 5,000.00 289,606.00
971,606.00
ng to 50,000

20,000 in which 5,000 was incurred for the duration of the construction.
The following are the properties acquired by Si Company in 2024

1. A Machine worth 400,000 purchased for only 350,000 cash.


2. An equipment purchased on account with an invoice price of 240,000 and a discount of 20,000.
3. A motor vehicle paid in 5 equal installments of 200,000 each. The cash price of the vehicle is 800,000
4. A Warehouse with a construction costs of 600,000. A similar warehouse can be purchased for P700,000.
5. A land in exchange of 20,000 shares of Si Company with a par value of 10 per share. The market value of the land is 400,000

Find the total value of the properties acquired

Machine 350,000.00
Equipment 220,000.00
Motor Vehicle 800,000.00
Warehouse 600,000.00
Land 400,000.00
Total 2,370,000.00
lue of the land is 400,000.

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