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Supporting Compuatation PDF
Supporting Compuatation PDF
1 - White Corporation
Nondepreciable:
Land, 1/1/05 2,500,000
Cash paid on purchase of land 10,000,000
Mortgage assumed on the land bought, including interest at 16% 16,000,000
Realtors 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 (600,000)
Land, 12/31/05 30,000,000 1
Depreciable:
Land improvements
Balance, 1/1/05 560,000
Cost of fencing the property 440,000 1,000,000 2
Building
Balance, 1/1/05 3,600,000
Amount paid to a contractor for the building erected 8,000,000
Building permit fees 50,000
Excavation expenses 250,000
Architects fee 100,000 12,000,000 3
2) Land 60,000
Land and building 60,000
4) Building 700,000
Land and building 700,000
5) Building 600,000
Land and building 600,000
7) Building 200,000
Land and building 200,000
Adjusted balances
Land Building
AJE no. 1 1,298,000 AJE no. 3 1,500
AJE no. 2 60,000 AJE no. 4 700,000
AJE no. 3 4,000 AJE no. 5 600,000
AJE no. 7 200,000
1,362,000 1,501,500
Question No. 2 - D
Machinery and Equipment (Straight line)
Balance, 1/1/05 6,250,000
Depreciation for 2005:
M & E balance, 1/1/05 22,500,000
Less machine destroyed by fire 575,000
Remainder of beginning balance 21,925,000
Depreciation rate (1/10 years) 10%
Depreciation on remainder of beginning bal. 2,192,500
Depreciation on machine destroyed by fire
(P575,000 x 10% x 3/12) 14,375
Depreciation on machine purchased on 7/1/05
[(P7,000,000+P125,000+P625,000) x 10% x 6/12] 387,500 2,594,375
Machine destroyed by fire (P575,000 x 5/10) (287,500)
Accumulated dep - Machinery & Equip., 12/31/05 8,556,875
Question No. 3 - B
Delivery equipment (SYD)
Balance, 1/1/05 2,115,000
Depreciation for 2005:
Depreciation on 1/1/05 balance (see info (e)) 450,000
Less depreciation on truck traded-in
(P450,000 x 2/10*) 90,000
Depreciation on remainder of beginning bal. 360,000
Depreciation on truck purchased on 1/2/05
(P600,000 x 4/10*) 240,000 600,000
Truck traded-in (P450,000 - P135,000) (315,000)
Accumulated dep - Delivery Equip., 12/31/05 2,400,000
* SYD = (4+3+2+1) = 10
Question No. 4 - A
Leasehold improvements (Straight line)
Question No. 5 - C
Machine destroyed by fire:
Amount recovered from insurance company 387,500
Less book value of machine:
Cost 575,000
Accumulated depreciation (see above) (287,500) 287,500
Gain on machine destroyed by fire 100,000
Truck traded-in:
Trade-in value (P600,000 - P500,000) 100,000
Less book value of truck traded-in 135,000
Loss on truck traded-in (35,000)
Net gain on asset disposals 65,000
PROBLEM NO. 6 - Josef, Inc.
Question No. 1 - B
Acquisition cost 10,400,000
Less residual value 800,000
Depletable cost 9,600,000
Total estimated reserves 8,000,000
Depletion rate 1.20
Tons mined 800,000
Depletion for 2005 960,000
Question No. 2 - D
Depreciation - Building [(P800,000/8,000,000 tons) x 800,000 tons x 80%] 64,000
Depreciation - Machinery [(P1,600,000-P320,000/4] 320,000
Total 384,000
Question No. 3 - B
Depletion (see no. 1) 960,000
Direct labor 640,000
Depreciation (see no. 2) 384,000
Miscellaneous mining overhead 128,000
Total available for sale 2,112,000
Divide by tons mined 800,000
Cost per ton 2.64
Unsold tons (800,000 - 640,000) 160,000
Inventory, 12/31/05 422,400
Question No. 4 - A
Cost of sales (640,000 tons x P2.64) 1,689,600
Question No. 5 - C
Sales (640,000 x P4.4) 2,816,000
Less cost of sales (see no. 4) 1,689,600
Gross profit 1,126,400
Operating expenses (576,000)
Depreciation - Building [(P800,000/8,000,000 tons) x 800,000 tons x 20%] (16,000)
Net income 534,400
Realized depletion (640,000 tons x P1.2) 768,000
Maximum amount that may be declared as dividends 1,302,400
PROBLEM NO. 7 - Pink Corporation
Question no. 1 - A
See journal entry for April 1.
Note: Cost of internally developed patent includes only the licensing and
other related legal fees in securing the patent rights.
Question no. 2 - B
See journal entry for May 1.
Question no. 3 - C
See journal entry for May 1.
Question no. 4 - C
Cost
Patent 492,500
Licences 200,000
Trademark 100,000 792,500
Less amortization
Patent (P492,500/6 x 9/12) 61,563
Licences (P200,000/6 x 8/12) 22,222
Trademark (P100,000/6 x 8/12) 11,111 94,896
Carrying value, 12/31/04 697,604
Question no. 5 - C
Organization expenses (Jan. 2 transaction) 233,000
Advertising expense (Jan. 15 transaction) 15,000
R and D expense (Dec. 31 transaction) 1,750,000
Total 1,998,000
PROBLEM NO. 8 - Silver Corporation
Question No. 1 - A
Trademark* -
Goodwill* -
Customer list (P220,000/3) 73,333
Total amortization 73,333
*The useful life is indefinite, so no amortization expense is recognized.
Question No. 2 - B
Trademark:
Carrying value 300,000
Recoverable amount (P10,000/0.06) 166,667 133,333
Goodwill*:
Carrying value of Hayo Manufacturing unit
(P2,700,000 + P1,500,000 - P1,800,000) 2,400,000
Recoverable amount (P250,000 x 12.0416) 3,010,400 -
Customer list
Carrying value (P220,000 - P73,333) 146,667
Recoverable amount:
2006: (P120,000 x 0.9434) 113,208
2007: (P80,000 x 0.8900) 71,200 184,408 -
Total impairment loss 133,333
*Since goodwill does not generate cash flows independently from other assets or group
of assets, the recoverable amount of goodwill as an individual asset cannot be
determined. Therefore, the recoverable amount is determined for the cash
generating unit to which goodwill belongs.
Question No. 3 - C
Cost 300,000
Less impairment loss 133,333
Carrying value, 12/31/05 166,667
Question No. 4 - A
Since goodwill is not amortized and is not impaired as of 12/31/05,
the carrying value is P1,500,000.
Question No. 5 - B
Cost 220,000
Less amortization for 2005 73,333
Carrying value, 12/31/05 146,667
PROBLEM NO. 9
1B
2B 11 D
3D 12 B
4A 13 A
5C 14 A
6A 15 D
7A 16 A
8D
9D
10 D