Z COMPANY began operations on October 1, 2014.

The company’s accountant has started to gather pertinent

information about each of the company’s property, plant and equipment shown below. When he was about to
prepare a schedule of PPE and depreciation, he was assigned to maintain the books of the company’s foreign
operations. You have been asked to assist in the preparation of this schedule. In addition to ascertaining that
the summarized data below are correct, you have accumulated the following information from the company’s
records and personnel:

a. The company computes depreciation from the first month of the month of acquisition to the first of the month
of disposition.

b. Land A and Building A were purchased from X COMPANY. Z COMPANY paid P12,300,000 for the land and
building together. At the time of acquisition, the land had a fair value of P1,350,000 and the building had a fair
value of P12,150,000.

c. Land B was acquired on October 3, 2014, in exchange for P37,500 ordinary shares of Z COMPANY. On the
acquisition date, Land B had a fair value of P1,365,000 and the company’s P5 par value ordinary shares had a
fair value of P35 per share.

d. Construction of Building B on the newly acquired land began on October 1, 2015. By September 30, 2016, Z
COMPANY had paid P4,800,000 of the estimated total construction costs of P6,750,000. It is estimated that the
building will be completed and occupied by July 2017.

e. Certain equipment was donated to the corporation by the national government. An independent appraisal of
the equipment when donated placed the fair market value at P450,000 and the salvage value at P45,000.

f. Machinery A’s total cost of P2,473,500 includes installation cost of P9,000 and normal repairs and
maintenance of P223,500. Salvage value is estimated at P90,000. It was sold on February 1, 2016 for P1,600,000.

g. On October 1, 2015, Machinery B was acquired with a down payment of P86,100 and the remaining payments
to be made in 11 annual instalments of P90,000 each, beginning October 1, 2015. The prevailing interest rate
was 8%. The following data were abstracted from present value tables (rounded):

10 years 11 years 15 years

Present value of 1 at 8% .463 .429 .315
Present value of an
ordinary annuity of 1 at 8% 6.710 7.139 8.559

Land A
Acquisition date: October 1, 2014

Building A
Acquisition date: October 1, 2014
Salvage value P600,000
Depreciation method Straight-line
Depreciation expense:
Year ended Sept. 30, 2015 P261,750

Land B
Acquisition date: October 3, 2014

Building B
Acquisition date: Under construction
Cost: P4,800,000 to date
Depreciation method: Straight-line
Salvage value: P -0-
Estimated life: 30 years
Depreciation expense:
Year ended Sept. 30, 2015 P -0-
Donated Equipment
Acquisition date: October 2, 2014
Salvage value: P45,000
Depreciation method: 150% declining balance
Estimated life: 10 years

Machinery A
Acquisition date: October 2, 2014
Salvage value: P90,000
Depreciation method: SYD
Estimated life: 8 years

Machinery B
Acquisition date: October 1, 2015
Salvage value: P -0-
Depreciation method: Straight-line
Estimated life: 20 years

1. Cost of Land A
a. 1,350,000 c. 11,070,000
b. 12,150,000 d. 1,230,000

2. Cost of Building A
a. 1,350,000 c. 11,070,000
b. 12,150,000 d. 1,230,000

3. Estimated useful life of Building A

a. 42 years c. 44 years
b. 40 years d. 46 years

4. Depreciation expense on Building A for the year ended September 30, 2016?
a. 261,750 c. 523,500
b. 288,750 d. 577,500

5. Cost of Land B
a. 1,552,500 c. 1,365,000
b. 427,500 d. 1,125,000

6. Depreciation expense on Building B for the year ended September 30, 2016?
a. 120,000 c. 288,750
b. 168,750 d. 0

7. Donated equipment should be measured and recognized at

a. 450,000 c. 495,000
b. 405,000 d. 0

8. Depreciation expense on the donated equipment for the year ended September 30, 2015
a. 0 c. 60,750
b. 74,250 d. 67,500

9. Depreciation expense on the donated equipment for the year ended September 30, 2016
a. 60,750 c. 57,375
b. 51,638 d. 67,500
10. Cost of Machinery A
a. 2,473,500 c. 2,160,000
b. 2,250,000 d. 2,151,000

11. Depreciation expense on Machinery A for the year ended September 30, 2015
a. 500,000 c. 480,000
b. 529,667 d. 478,000

12. Depreciation expense on Machinery A for the year ended September 30, 2016
a. 140,000 c. 130,926
b. 113,426 d. 175,000

13. Gain/(loss) recognized on sale of Machinery A on February 1, 2016?

a. 0 c. 5,000
b. 60,000 d. (30,000)

14. Cost of Machinery B

a. 728,610 c. 780,000
c. 731,670 d. 685,434

15. Depreciation expense on Machinery B for the year ended September 30, 2016
a. 36,430 c. 36,584
b. 39,000 d. 34,272