Case 1.

PPE

Shanghai Co. had the following transactions regarding its property, plant and equipment:

a. Issued Php 5.00 200,000 ordinary shares out of its 400,000 authorized shares in exchange for 4,000,000
cash annd land with a fair value of Php 2,500,000. On the same date, shares of Shanghai Corporation are
selling at Php 26.00.

b. Incurred the following expenses for the contruction of building:

Direct Materials
Site Labor Cost
Incremental Cost Incurred
Interest imputed from financing the construction
Wasted Materials (300,000 abnormal)
Total Costs Incurred

Building could have been purchased from outside parties at Php 5,250,000

c. Purchased machinery for Php 250,000 cash

d. Purchased truck #1 for Php 500,000 (3/10, N/30) . The discount was not availed.

e. Purchased truck #2 at an installment price of Php600,000 by issuing notes. The installment will be
payable in 3 equal installment. The cash price equivalent of the purchase is 450,000.

f. Issued 8% 1,000 bonds of Php1,000 par to finance the purchase of equipment. The bonds are selling in
the market at 98. The equipment's fair value at that time was Php900,000.

g. An investment in equity security valued at the market for Php700,000 and costing Php 800,000 was
exchange for an equipment with a fair value of Php 750,000. Additional cash payment was made by
Shanghai for Php30,000.

h. Raynum entity traded an old equipment with a dealer of a new model. The following data are available:

Old Equipment: PHP

Cost 1,000,000
Accumulated Depreciation 750,000
Book Value 250,000
Fair Value 300,000
Trade-in Value 400,000

New Equipment:
List Price 2,000,000
Trade-in value of old equipment (400,000)
Cash Payment 1,600,000

Kindly perform the journal entries for each scenario.

Case 2. Depreciation

Mis Hart Co. has an asset with a cost amounting to Php1,000 original cost, Php100 salvage value and 5 years
of useful life.

Php
Historical Cost 1000
Salvage Value 100
Useful Life 5

Straight Line Method:

Year Depreciable Cost Depreciation Rate Depreciation Expense

1st 900 20% 180
2nd 900 20% 180
3rd 900 20% 180
4th 900 20% 180
5th 900 20% 180

Declining-Balance:

Depreciation Rate 20%

Double Rate 2
Double Declining Rate 40%

Year Depreciation Rate Accumulated Depreciation Book Value

Beg 1000
1st 400 400 600
2nd 240 640 360
3rd 144 784 216
4th 86.4 870.4 129.6
5th 129.6 1000 0

Note 1 Ignore the salvage value in the computation

Note 2 Since its useful life is only up to the 5th year, therefore, the BV at the end of 4th year
would be the whole depreciation expense recognized at the end of the term

Sum-of-the-years Digits:

1. Determine year's digits. 1,2,3,4,5

2. Caculate the sum of the digits 15(1+2+3,+4+5)

Total
Depreciable Depreciatio Depreciation Accumulated Book
Year Cost n Rate Expense Depreciation Value
Beg 1000
1st 900 33% 300 300 700
2nd 900 27% 240 540 460
3rd 900 20% 180 720 280
4th 900 13% 120 840 160
5th 900 7% 60 900 100