Problem 4

1.)

Land used as plant site 5,000,000.00

Building under construction to be used as new office 12,000,000.00
Building leased out under various operationg leases 6,000,000.00
Equipment held for rental under various operating leases 1,200,000.00
Fixtures used in rendering services 500,000.00
Bearer plants 100,000.00
Property, Plant and Equipment 24,800,000.00 B

2.)

Purchase price 224,000.00

Divide by: 1.12
Total 200,000.00

Purchase price exclusive of VAT 200,000.00

Add: relocation and reinstallation cost 30,000.00
Cost of the equipment 230,000.00

3.)
Problem 4

6.) A
Cost of equipment 200,000.00
Residual value 20,000.00
Useful life 5 years
Straight line rate (100% /5 years) 20%
Fixed rate (150% x 20%) 30%

Depreciation for:
20x1 (200,000 x 30%) 60,000.00
20x2 (200,000 - 60,000 x 30%) 42,000.00
102,000.00

7.) D
Composite life Composite rate Depreciation for current year
4 years 24.14% 71,000.00

*Computation

Original cost 290,000.00

Less: residual value 10,000.00
Total 280,000.00
Small tools 12,000.00
Less: Retired small tools 8,000.00
Depreciable amount 284,000.00

Annual group depreciation 70,000.00

Net disposal proceeds 1,000.00
Annual depreciation 71,000.00

Composite life:
Depreciable amount 284,000.00
Divide by: Annual depreciation 71,000.00
4

Composite rate:
Annual depreciation 71000
Divide by: Total cost 294000
0.2415

8.) C
Retirement method
Cost of disposals 72,000.00
Less: Net disposals proceeds 4,600.00
Depreciation expense 67,400.00

Replacement method
Cost of additions (20,000+44,000) 64,000.00
Cost of disposals 24,000.00
Total 88,000.00
Less: Net disposal proceeds 4,600.00
Depreciation expense 83,400.00

Inventory method
Beginning balance 300,000.00
Additions 124,000.00
Total 424,000.00
Less:Net disposal proceeds 4,600.00
Ending balance 352,000.00
Depreciation expense 67,400.00

9.) D
Cost of leasehold improvement 480,000.00
Divide by: (years) 9.00
Total 53,333.33

Cost of leasehold improvement 480,000.00

Less: 53,333.33
Carrying amount-Dec. 31, 2002 426,666.67

10.)
Gain (loss) on sale
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