Professional Documents
Culture Documents
Assets: BBGV Beverages
Assets: BBGV Beverages
1.
BBGV BEVERAGES
ASSETS
2020 2021
Current Assets
Non-Current Assets
LIABILITIES AND PARTNERS' EQUITY
Liabilities
Partners' equity
2.
BBGV BEVERAGES
2021
Sales 12,204,180.00
Operating expenses
3.
Additional information:
All of the movements in the Property, Plant and Equipment account is because there was
a purchase of a new factory equipment worth P113,200 during 2021.
All expenses during 2021 were paid in cash, except for depreciation expense.
The only movements in the equity account were the (1) net income and (2) additional
investments of the partners. There were no equity withdrawals during 2021.
3.
Required: Construct a statement of cash flows for BBGV for its calendar year ending December
31, 2021. The operating activities section therein should be presented using the indirect
method.
Item No. Quantity Cost per unit NRV per unit Lower of Cost
and NRV
A1458 600 2.30 3.26 1,380
A1965 815 3.40 2.95 2,404.25
B6730 749 7.34 9.05 5,497.66
D0943 98 1.23 0.88 86.24
G8123 156 3.56 5.03 555.36
W2167 1492 6.12 7.3 9,131.04
Inventories at 19,054.55
the lower of cost
and net
realizable value
QUESTION 3
1. A company bought a very expensive, state-of-the-art factory equipment that can finish producing
goods at 100 pieces per 10 seconds, inevitably reducing the need to employ human resources
and depending solely on machinery. However, the manufacturer of the equipment informed the
company that the equipment, based on historical and customer records, has a useful life of 2
years only. According to the manufacturer, annual maintenance costs should be incurred to
extend the useful life of the equipment.
The CFO of the company then instructs the comptroller to use a useful life of 5 years in the
accounting records, instead. Also, he instructs the comptroller to capitalize the annual
maintenance costs to the asset, instead of expensing it.
Based on the given situation, the historical record of the equipment entailed that
it has a useful life for only 2 years. Still, to extend its useful life, the manufacturer
suggested to incur annual maintenance cost. In compliance on PAS 16, two of the factors
in determining useful life of an equipment are legal limits and expected physical wear and
tear. Since the useful life of 2 years is not a legal basis, it falls under the criteria of
expected wear and tear wherein the useful life depends on its operational function such
as repair and maintenance program. Therefore, 5 years of useful life is correct to use
since annual maintenance would be conducted to further extend its usage.
Yes, it is correct to capitalize the maintenance costs to the assets. Based on the
paragraph 7 of PAS 16, it was indicated that the expenditure would be capitalized when
there is “an expected future economic benefit, whether the receipt of those benefits is
probable, and whether the benefits will flow specifically to the entity. Since, the
maintenance costs would extend its useful life, the subsequent expenditure can be
capitalized to assets.
QUESTION 4
1. In setting up its systems to apply PAS 36 Impairment of Assets, management of Deku
Incorporated wants to know how often the company needs to apply an impairment test on its
assets, and what information it needs to generate to determine whether a test is needed.
As indicated under the PAS 36, conducting an impairment test would guarantee that disclosed
assets would not have carrying amounts, the amount of assets after deducting accumulated depreciation
and accumulated impairment loss, in excess of their recoverable amounts. Assets are considered to be
tested when there is an indication that the asset may be impaired in accordance to paragraph 9 of PAS
36. Nevertheless, there are also assets which are required to take an impairment test every year. These
are: (1) intangible assets with indefinite useful lives, (2) intangible assets not yet available for use and, (3)
goodwill acquired in a business combination. These assets are required to be tested automatically since
its carrying amount is uncertain. Essentially, it was also elaborated in chapter 11 that depreciation is the
allocation of cost and not its revelation. This leads the unallocated portion to reflect the carrying amount of
an asset. This condition connects in evaluating the impairment of the assets as it is not involved in
depreciation.