GOVERNMENT GRANT

1 Cash 20,000,000
Deferred Income - Government Grant 20,000,000

Jan. 1, 2021 Building 30,000,000

Cash / Various accounts 30,000,000

Dec. 31, 2021 Depreciation Expense - Building 3,000,000

Accumulated Depreciation - Building 3,000,000

Deferred Income - Government Grant 2,000,000

Income from Government Grant 2,000,000
2
Jan. 1, 2025 Deferred Income - Government Grant 12,000,000
Loss on Repayment of Grant 8,000,000
Cash 20,000,000

Grant received 20,000,000

Realized portion of grant:
2021 (2,000,000)
2022 (2,000,000)
2023 (2,000,000)
2024 (2,000,000)
Unrealized grant 12,000,000
Problem 1
1/1/2021 Loss on replacement 2,400,000
Acc. Depreciation (3M x 8/40) 600,000
Building 3,000,000

Building 4,000,000
Cash 4,000,000

12/31/2021 Depreciation expense 1,340,541

Acc. depreciation 1,340,541

Adjusted cost of building (P60M - P3M + P4M) 61,000,000

Adjusted acc. depreciation:
Depreciation 2013-2020 (P60M x 8/40) 12,000,000
Depreciation of replaced wall (600,000) (11,400,000)
New depreciable cost 49,600,000
Remaining useful life (40-8+5) 37
Depreciation - 2021 1,340,541

Problem 2
Cost 5,000,000
Residual value (50,000)
Depreciable cost 4,950,000
Hours Units
Depreciable cost 4,950,000 4,950,000
Total base 125,000 1,800,000
Depreciation rate 39.6 2.75

2020 Depreciation 2021 Depreciation

Hours Units Hours Units
Actual usage/produce 10,000 80,000 8,000 150,000
Depreciation rate 39.60 2.75 39.60 2.75
Depreciation expense 396,000 220,000 316,800 412,500

Problem 3
Cost 3,000,000
Residual value (30,000)
Depreciable cost 2,970,000

Sum of years' digits

Sum of years 36
Depreciation Accumulated Carrying
Computation Expense Depreciation Value
2020 Cost 3,000,000
2020 P2,970,000 x 8/36 660,000 660,000 2,340,000
2021 P2,970,000 x 7/36 577,500 1,237,500 1,762,500
2022 P2,970,000 x 6/36 495,000 1,732,500 1,267,500
2023 P2,970,000 x 5/36 412,500 2,145,000 855,000
2024 P2,970,000 x 4/36 330,000 2,475,000 525,000
2025 P2,970,000 x 3/36 247,500 2,722,500 277,500
2026 P2,970,000 x 2/36 165,000 2,887,500 112,500
2027 P2,970,000 x 1/36 82,500 2,970,000 30,000

Double declining
Double declining rate (1/8*2) 0.25
Depreciation Accumulated Carrying
Computation Expense Depreciation Value
2020 Cost 3,000,000
2020 P3000,000 x .25 750,000 750,000 2,250,000
2021 P2,250,000 x .25 562,500 1,312,500 1,687,500
2022 P1,687,500 x .25 421,875 1,734,375 1,265,625
2023 P1,265,625 x .25 316,406 2,050,781 949,219
2024 P949,219 x .25 237,305 2,288,086 711,914
2025 P711,914 x .25 177,979 2,466,064 533,936
2026 P533,936 x .25 133,484 2,599,548 400,452
2027 P400,452 - P30,000 370,452 2,970,000 30,000
Problem 1
1/1/2021 Land 12,000,000
Cash 12,000,000
12/31/2021 Land 3,000,000
Revaluation surplus 3,000,000
12/31/2022 Revaluation surplus 3,000,000
Impairment loss 3,000,000
Land 6,000,000
12/31/2023 Land 7,500,000
Gain on reversal 3,000,000
Revaluation surplus 4,500,000
1/1/2024 Cash 20,000,000
Land 16,500,000
Gain on sale of land 3,500,000
Revaluation surplus 4,500,000
Retained earnings 4,500,000

Problem 2
1/1/2020 Equipment 7,500,000
Cash 7,500,000
12/31/2020 Depreciation expense 375,000
Accumulated depreciation 375,000
12/31/2021 Depreciation expense 375,000
Accumulated depreciation 375,000

*CV, 12/31/21 6,750,000

*Remaining life 18
12/31/2021 Cost Rep.cost Increase
Equipment 7,500,000 12,000,000 4,500,000
Acc. Depreciation (750,000) (1,200,000) (450,000)
CV/SV/RS 6,750,000 10,800,000 4,050,000

Equipment 4,500,000
Accumulated depreciation 450,000
Revaluation surplus 4,050,000
12/31/2022 Depreciation expense (10.8M / 18) 600,000
and Accumulated depreciation 600,000
12/31/2023 Revaluation surplus (4,050 / 18) 225,000
Retained earnings 225,000

*CV, 12/31/23 (10.8M - 1.2M 9,600,000

*Revaluation surplus, 12/31/19 (4,050 - 450) 3,600,000

12/31/2023 Cost Rep.cost Decrease

Equipment 12,000,000 5,625,000 6,375,000
Acc. Depreciation (2,400,000) (1,125,000) (1,275,000)
CV/SV/RD 9,600,000 4,500,000 5,100,000

Accumulated depreciation 1,275,000

Revaluation surplus 3,600,000
Revaluation loss 1,500,000
Equipment 6,375,000
12/31/2024 Depreciation expense 900,000
and Accumulated depreciation 900,000
12/31/2025 *CV, 12/31/25 (4.8M - 1.8M) 2,700,000

12/31/2025 Cost Rep.cost Increase

Equipment 5,625,000 11,718,750 6,093,750
Acc. Depreciation (2,925,000) (6,093,750) (3,168,750)
CV/SV/Rev increase 2,700,000 5,625,000 2,925,000
Recovery of impairment loss (1,500,000)
Revaluation surplus 1,425,000

Equipment 6,093,750
Accumulated depreciation 3,168,750
Gain on reversal 1,500,000
Revaluation surplus 1,425,000
12/31/2026 Depreciation expense (5.625M / 5) 1,125,000
Accumulated depreciation 1,125,000
Revaluation surplus (1.425M / 5) 285,000
Retained earnings 285,000

Problem 3
1/1/2020 Machinery 10,000,000
Cash 10,000,000
12/31/2020 Depreciation expense 900,000
to Accumulated depreciation 900,000
12/31/2023

12/31/2023 Cost Rep.cost Increase

Machinery 10,000,000 12,500,000 2,500,000
Residual value (1,000,000) (1,000,000) -
Balance 9,000,000 11,500,000 2,500,000
Acc. Depreciation (3,600,000) (4,600,000) (1,000,000)
Balance 5,400,000 6,900,000 1,500,000
*Remaining life 6
Machinery 2,500,000
Accumulated depreciation 1,000,000
Revaluation surplus 1,500,000
12/31/2024 Depreciation expense (6.9M / 6) 1,150,000
Accumulated depreciation 1,150,000
Revaluation surplus (1.5M / 6) 250,000
Retained earnings 250,000
 Year-end Cash inflow Cash outflow Net cash flow PV factor PV
2020 5,500,000 3,500,000 2,000,000 0.90909 1,818,182
2021 5,000,000 3,250,000 1,750,000 0.82645 1,446,281
2022 4,000,000 2,500,000 1,500,000 0.75131 1,126,972
2023 3,000,000 1,750,000 1,250,000 0.68301 853,767
2024 2,000,000 1,000,000 1,000,000 0.62092 620,921
Total 5,866,123

Fair value 5,000,000 Cost 10,000,000

Value in use 5,866,123 ahigher AD, 1/1/20 (2,000,000)
Rec. amount 5,866,123 CV, 1/1/20 8,000,000
Recoverable amount (5,866,123)
Impairment loss 2,133,877

1/1/2020 Impairment loss 2,133,877

Accumulated impairment loss 2,133,877