Module 5: Quiz

1.
Assumption 1: Cost Model
1. Cost Php 2,200,000
Salvage Value 200,000
Depreciable Cost Php 2,000,000
Useful Life 10 years
Depreciation Expense Php 200,000

2. Revaluation Surplus is NIL

3. Depreciation 2019 – Php 200,000
4. Cost Php 2,200,000
Accumulated Depreciation 600,000
Book Value Php 1,600,000
Recoverable Amount 939,500
Impairment Loss Php 660,500

5. Carrying Value Php 939,500

Salvage Value 40,000
Depreciable Cost Php 899,500
Life 7 years
Depreciation Expense Php 128,500

Assumption 2: Revaluation Model

1. Cost Php 2,200,000

Salvage Value 200,000
Depreciable Cost Php 2,000,000
Useful Life 10 years
Depreciation Expense Php 200,000

2.

Historical Cost Replacement Cost Increase (Decrease)

Machinery Php 2,200,000 Php 2,990,000 Php 790,000
Accumulated Depreciation Php 200,000 Php 279,000 Php 79,000
Difference Php 2,000,000 Php 2,711,000 Php 711,000

3. Carrying Value, Jan 2019 Php 2,990,000

Less: Salvage Value 200,000
Depreciable Cost Php 2,790,000
Life 9 years
Depreciation Expense – 2019 Php 310,000

4. Carrying Amount, Jan. 1, 2019 Php 2,990,000

Less: Accumulated Depreciation 620,000
Depreciable Cost Php 2,370,000
Fair Value 939,500
Impairment Loss Php 1,430,500
 5. Carrying Amount Php 939,500
Salvage Value 40,000
Depreciable Cost Php 899,500
Life 7 years
Depreciation, 2021 Php 128,500

2. 1. Patent (200,000 / 10) 20,000

Computer software (100,000 x 60/120) 50,000
Php 70,000
2. Copyright:
Carrying value 400,000
Less: Recoverable amount (80,000 / .05) 160,000 240,000

Tradename:
Carrying Value 350,000
Less: Recoverable amount (15,000/.05) 300,000 50,000

Goodwill:
Carrying Value 3,000,000
Less: Recoverable Amount (200,000 x 14.0939) 2,818,780 181,220 Php 471,220

3. Goodwill Php 900,000

Allocated Impairment Loss 181,220 Php 718,780

4. Patent Php 180,000

Copyright 160,000
Tradename 300,000
Computer Software 50,000 Php 690,000

3. 1. Total estimated mugs/to be issued [(300,000 X 50%) /20 7,500

Less mugs issued 4,500
Balance 3,000
Multiply by premium cost (P360,000/,8,000) P 45
Estimated premium liability P135,000

2. Warranty expense (P350,000 x 6%) P21,000

3. Provision for guarantee [(P250,000+P450,000)/2] P350,000

4. NIL
4. 1. Issue price (P2,000,000 X 1.02) P2,040,000
Accrued interest (P2,000,000 x 12% x 3/ 12) 60,000
Total cash received from sale of bonds P2,100,000

2. Nominal interest (P2,000,000 x 12% x 9/ 12) P180,000

Less premium amortization for 2013
(P40,000* X 9/117**) 3,077
Interest expense for 2013 P176,923

* (P2,000,000x.02)
**120 months (10 years) - 3 months (1/1/2013 to 4/ 1/2013)

3. Carrying amount P2,040,000

Less premium amortization for 3,077
Carrying amount P2,036,923

4. Face value of bonds retired P1,000,000

Add unamortized bond premium
(P40,000 x ½ x 57/117) 9,774
Carrying amount of bonds retired P1,009,744
Less retirement price (P1,000,000 x 99) 990,000
Gain on bond reacquisition P 19,744

5. Face value of bonds retired P1000,000

Add unamortized bonds premium,
(P40,000 x ½ x 54/ 117) 9,231
Carrying amount of bonds retired 1,009,231
Less retirement price (P1,000,000x .97) 970,000
Gain on bond reacquisition P 39,321

5. 1. PV of principal (P5,000,000x0.6499) P 3,249,500

PV of interest [(P5,000,000 X 11%) X 3.8897] 2,139,335
Issue price P5,388,835

2. Carrying amount P5,388,835

Less premium amortization:
Nominal interest (P5,000,000 X 1 1%) P550,000
Effective interest'(P5,388,835 x 9%) 484,995 65,005
Carrying amount, P5,323,830

Alternative computation:

PV of principal (P5,000,000 x 0.7084) P3,524,000*

PV of interest [(P5,000,000 x 11%) x3.2397] 1,781,835*
Carrying amount, 12/31/09 P5,323,835*
* P5 difference due to rounding off.

3. Carrying amount P5, 323,830

Less premium amortization for 2009:
Nominal interest (P5, 000,000 x 11%) P550, 000
Effective interest (P5, 323,830 x9%) 479,145 70,855
Carrying amount P5,252,975

Carrying amount of bonds retired (P5,252,975 x3/5) P3, 151,785

 Less retirement price 2,970,000
Gain early retirement of bonds P 181,785

6. Financial Income Php 20,000,000

Taxable temporary difference (3,000,000)
Deductible temporary difference 1,500,000
Tax Payable Php 18,500,000
Tax Rate 30%
Tax Payable Php 5,550,000

7. Cost of Machine Php 487,447

Less: Salvage Value 60,000
Cost Php 427,447
Life 8 years
Depreciation Expense Php 53,431

8. Cost of Machine Php 487,447

Less: Salvage Value 50,000
Cost Php 437,447
Life 4 years
Depreciation Expense Php 109,362

9. 1. Cost Php 900,000

Incremental Cost 24,128
Total Cost Php 924,128
Less: Total Payment 1,006,400
Interest Income Php 82,272

2.
Date Payment Interest Amortization Present Value
Dec 2018 Php 924,128
Dec 2018 Php 251,600 Php 251,600 Php 672,528
Dec 2019 Php 251,600 Php 40,352 Php 211,248 Php 461,279

10. 1. Sales Price Php 993,630

Cost Php 1,200,000
Acc Dep 100,000 1,100,000
Loss Php 106,370

2. Sales Price Php 993,630

Cost Php 1,000,000
Acc Dep 100,000 900,000
Loss Php 93,630
Lease Term 4 years
Gain on Sale Php 23,408

11. 1. Fair Value, Jan. 1 Php 3,600,000

Less: PV, DBO (4,000,000)
Net Liability Php 400,000

2. Fair Value, Jan. 1 Php 3,600,000

Return on Plan Assets 960,000
Contributions to the fund 240,000
Benefits Paid (600,000)
Settlement Price – DBO ( 80,000)
 Fair Value of Plan Assets, Dec 31 Php 4,120,000
PV of Defined Benefit Obligation, Jan. 1 Php 4,000,000
Current Service Cost 2,200,000
Discount (10%) 400,000
Benefits Paid (600,000)
PV of settled DBO ( 30,000) Php 5,970,000
Net Benefit Liability, December 31 Php (1,850,000)

Thank You!