PROPERTY, PLANT AND EQUIPMENT (PAS 16)

A. CHARACTERISTICS (ALL should be present)

1 tangible - with physical substance
2 used in aid of the normal operations of the business
3 has more than 1 period of useful life
*4 subject to depreciation except for land (for present or future plant site)
and artworks (in case of museums)

B. VALUATION
1 INITIAL (upon acquisition)
- based on COST (inclusive of Directly Attributable Costs)
- COST recognized based on the nine (9) modes of acquisition

2 SUBSEQUENT (on report date)

- entity has the choice to use any of the following but to be applied to the ENTIRE CLASS
of property, plant and equipment

A. COST MODEL
Carrying Value = Cost - Accumulated Depreciation**
** cumulated depreciation and impairment losses during its used/expired life,
as seen in the following entries:

RECOGNITION OF PERIODIC DEPRECIATION

ENTRY: Depreciation expense XX
Accumulated depreciation

RECOGNITION OF IMPAIRMENT FOR DEPRECIABLE ASSET

ENTRY: Impairment loss XX
Accumulated depreciation

B. REVALUATION MODEL
Revalued Carrying Value = Fair value (@ the date of revaluation) - Subsequent Accumulated Depreciation**
** cumulated depreciation and impairment losses during its used/expired life
** use the principles behind revaluation

1 REVALUATION
IF: the CARRYING VALUE < REVALUED AMOUNT**
**Priority: 1. FAIR VALUE @ the date of revaluation
2. In the absence of fair value, DEPRECIATED REPLACEMENT COST or SO
Depreciated Replacement Cost = Replacement Cost - Proportiona
REPLACEMENT
 2 Methods to Recognize
A. Proportionate Approach
@ HistoricalCost @Replacement Cost
Cost 100% 10,000 xx
LESS: Accum. Dep'n** 60% 6,000 xx
Carrying value 40% 4,000 xx

** ensure that the Accumulated Depreciation is updated until the date of revaluation

UPON REVALUATION (at the date of revaluation), the entry to record the variance

ENTRY: PPE ( = appreciation)

Accumulated depreciation (= increase in A/D)
Revaluation surplus
PIECEMEAL REALIZATION

B. Elimination Approach
UPON REVALUATION (at the date of revaluation)

ENTRY: Acccumulated depreciation (as seen in the books)

PPE
( to eliminate A/D)

PPE
Revaluation surplus

2 IMPAIRMENT
IF: the CARRYING VALUE > RECOVERABLE AMOUNT**
**HIGHER: 1. FAIR VALUE less Cost to Dispose
2. VALUE IN USE**
**Present value of estimated net future cash flows

UPON IMPAIRMENT (at the date of impairment), the entry to record the variance

ENTRY: Impairment loss

Accumulated depreciation
( for depreciable assets)

ENTRY: Impairment loss

PPE
( for non-depreciable assets like Land)
 COST - A/D - AIL
ses during its used/expired life,

XX

XX

quent Accumulated Depreciation**

ses during its used/expired life

DEPRECIATED REPLACEMENT COST or SOUND VALUE

ent Cost = Replacement Cost - Proportionate Accumulated depreciation
REPLACEMENT 21000
 @Replacement Cost Variance
21,000.0 11,000.0 Appreciation
12,600.0 6,600.0 Increase in A/d
8,400.0 4,400.0 Revaluation Surplus/Net appreciation

s updated until the date of revaluation

n), the entry to record the variance

11,000.0 PPE A/D

tion (= increase in A/D) 6,600.0 10,000
4,400.0 11,000
1466.6666667 21,000
REV. SURP 1,467
R/E 1,467

seen in the books) 6000 PPE A/D

6000 10,000 6,000 6,000
4,400
8,400
4400
4400

mated net future cash flows

t), the entry to record the variance

XX
XX

XX
XX
ssets like Land)
A/D
6,000 4,000
6,600
12,600 8,400

A/D
6,000 4,000

- 8,400
PROPERTY, PLANT AND EQUIPMENT (PAS 16)

NINE (9) MODES OF ACQUISITION

1 Cash Purchase
ENTRY: PPE*** XX
Cash XX

***Cost = Cash paid + Directly attributable costs

IF 2 or more assets are purchased with a single price, use the relative sales price method
or the basket price allocation, example:
3 items were purchased at a single purchase price of P50, considering
the individual fair value of the items as follow:
Fair Value Fraction Sales Price Cost (to be recorded)
item 1 10 10/60 50 8
item 2 20 20/60 50 17
item 3 30 30/60 50 25
60 50

2 On Account
ENTRY: PPE*** XX
Accounts payable XX

***Cost = Invoice price - Cash discounts, regardless whether taken or not + Directly attributable costs

Note : INVOICE price = List pice - trade discounts

Example: X purchased an equipment amounting to P10,000, 2/10, n/20.

Upon purchase: Equipment 10,000

@ gross Accounts payable 10,000

If paid within Accounts payable 10,000

discount period: Equipment (2% x 10,000) 200
Cash 9,800

If NOT paid within Accounts payable 10,000

discount period: Cash 10,000

Purchase discount lost 200

Equipment (2% x 10,000) 200
3 On Installment (Deferred)
NON-INTEREST BEARING NOTE INTEREST BEARING NOTE
ENTRY: PPE*** XX ENTRY: PPE***
Discount on Notes payable XX
Notes payable XX

***Cost = Cash price equivalent+ Directly attributable costs

OR
***Cost = Present Value of the Consideration GIVEN+ Directly attributable costs

Note : Discount on Notes payable = Installment Price - Cash Price

DIUP DIDP = Interest component to be amortized over the
DCIPP DPIPP credit period
DRIAP DPEAP = counterpart of Unearned interest income in relati
to Notes receivable
= amortization methods: effective interest method
outstanding method, straight-line method

ENTRY: PPE*** XX
Discount on Notes payable XX
Notes payable XX
Cash XX

(with downpayment)

4 Issuance of OWN shares

ENTRY: PPE*** XX X acquired land from Y by issuing 10,000 sh,
Share Capital XX The shares of X are currently traded in the ma

***Cost = based on the priority+ Directly attributable costs

1. Fair value of asset RECEIVED LAND
2. Fair value of shares GIVEN/issued ORD. SHARE CAP ( 10,000
3. Par value of shares GIVEN/issued Share Premium - ordinar

5 Issuance of OWN bonds

ENTRY: PPE*** XX buyer
Bonds payable XX INV. IN BONDS
EQUIPMENT
***Cost = based on the priority+ Directly attributable costs
1. Fair value of bonds GIVEN/issued
2. Fair value of asset RECEIVED
 3. Book value of bonds GIVEN/issued

6 Exchange CASH noncash asset to a non-cash asset

ENTRY: PPE*** XX ppe
Loss on exchange XX
Non-cash Asset XX
Gain on exchange XX
CASH
***Cost = based on the priority+ Directly attributable costs
With Cash Involved
If WITH Commercial Substance Payor Recipient
1. Fair value of asset GIVEN + Cash - Cash
2. Fair value of asset RECEIVED + Cash - Cash
3. Book value of asset GIVEN + Cash - Cash

If LACKS Commercial Substance

3. Book value of asset GIVEN + Cash - Cash

Note: TRADE IN - is a form of exchange which usually involves a significant amount of cash,
thus, with commercial substance.
- involves a nondealer acquiring the asset from a dealer

7 Donation
ENTRY: PPE*** XX DONOR
Donated capital/SHARE PREMIUM XX For Shareholders
OR Deferred income XX For Non-Shareholders (with conditions)
OR Income XX For Non-Shareholders (without conditions)

***Cost = Fair value of the asset Received+ Directly attributable costs

Note: Expenses incurred in connection with donation, like registration fees and legal fees shall be charged
to "donated capital" account ( if donor is a shareholder), or expense (if non-shareholder)

Directly attributable costs incurred subsequently, such as installation and other costs necessary
to bring the asset to the location and condition for the intended use shall be capitalized

8 Government Grants (PAS 20)

ENTRY: PPE*** XX
Deferred income XX For Non-Shareholders (with conditions) like the GOVERN

***Cost = Fair value of the asset Received+ Directly attributable costs

Note: Government grants are also known as subsidies, subventions, or premiums
Forgiveable loans from government is a government grant
The benefit of government loan with a NIL/zero or below-market rate of interest is a government grant.
The benefit is measured as = FACE amount of loan - Present value of loan
ENTRY: Discount on notes payable XX CASH
Deferred income XX NOTES PAYABLE

Government Assistance is action by government designed to provide an economic benefit specific to an entity
or range of entities qualifying under certain criteria. No value can be reasonably be placed upon it

Classifications of Government Grants

1. Grant related to Asset - whose primary condition is for the entity to purchase, construct or acquire
a long-term asset

2. Grant related to Income - other than related to asset

Accounting for Government Grants

** to be recognized as income on a systematic basis over the periods in which the entity recognizes
as expenses the related costs for which the grant is intented

ENTRY: Deferred income XX

Income from gov. grants XX

A. Grant in recognition of specific expenses shall be recognized as income over the period of the
related expense
GIVEN: Grant received in cash 1,000,000
Projected expenses 1st yr 500,000 5/12
2nd yr 400,000 4/12
3rd yr 300,000 3/12
total 1,200,000

ENTRY: Cash 1,000,000

Deferred income 1,000,000

ENTRY: Deferred income 416,666.67

Income from gov. grants 416,666.67
(1,000,000 x 5/12)
 income for the 1st year

B. Grant related to depreciable assets shall be recognized as income over the periods
and in proportion to the depreciation of the relaed asset
GIVEN: Grant received in cash 1,000,000
To construct a building which costs 1,500,000
Est. useful life of building 20 yrs

ENTRY: Cash 1,000,000

Deferred income 1,000,000

ENTRY: Deferred income 50,000.00

Income from gov. grants 50,000.00
(1,000,000 x 20 yrs)
income for the 1st year

C. Grant related to non-depreciable assets requiring fulfillment of certain conditions shall be

recognized as income over the periods which bear the cost of meeting the conditions
GIVEN: Grant received in non-depreciable asset ex. Land 1,000,000
To construct a building which costs 1,500,000
Est. useful life of building 20 yrs

ENTRY: Land 1,000,000

Deferred income 1,000,000

ENTRY: Deferred income 50,000.00

Income from gov. grants 50,000.00
(1,000,000 x 20 yrs)
income for the 1st year

D Grant that becomes receivable as compensation for expenses or losses already incurred
for the purpose of giving immediate financial support to the entity with no further related
costs shall be recognized as income in the period of which it become receivable or
recognized immediately. ( during calamities, war and the like)
GIVEN: Grant received in cash 1,000,000

ENTRY: CASH 1,000,000

Income from gov. grants 1,000,000

Repayment of Government Grants

*** a grant that becomes repayable because of noncompliance with conditions shall be accounted
 for as a change in accounting estimate

** if grant related to income = to be applied first against any unamortized deferred income and any excess
shall be recognized immediately as expense
GIVEN: Grant received in cash 1,000,000
To construct a building which costs 1,500,000
Est. useful life of building 20 yrs
At the end 4th yr, repayment was made due to noncompliance to conditions

Deferred income balance , end of 4th yr

Initial balance 1,000,000
Less: Amortized for 4 years
[(1,000,000/20) x 4 yrs] 200,000
Ending balance 800,000

ENTRY: Deferred income 800,000

Loss on repayment of grant 200,000
Cash 1,000,000
Entry to repay grant

Note: the amount of grant is to be repaid in FULL

** if grant related to asset = shall be recorded by increasing the carrying amount of the asset
= the cumulative additional depreciation that would have been recognized
to date in the absence of the grant shall be recognized immediately as an expense.

ENTRY: Building 1,000,000

Cash 1,000,000
Entry to repay grant

Total recorded dep'n Dep'n if no grant

Cost 500,000 1,500,000
EUL 20 20
used life 4 4
100,000 300,000 200,000

ENTRY: Depreciation expense 200,000

Accumulated depreciation 200,000
Additional Entry to repay grant

9 Construction
ENTRY: PPE*** XX
Cash XX

***Cost = Material + Labor + Overhead + Borrowing cost *

Note: Abnormal amount of wasted material, labor or overhead incurred in the production
of self-constructed asset is an outright EXPENSE

Intervening Operations = operations that may occur before or during construction but are
not necessary to bring the item to the location and condition for intended use.
Examples are: Use of building site as car park until construction starts
= the income and related expense of incidental operations are
recognized in the profit or loss.

BORROWING COST (PAS 23)

= these are interest and other costs that an entity incurs in connection with borrowing funds.
= include interest expense, finance charge, and exchange difference arising from foreign currency
borrowing and is regarded as an adjustment to interest cost.

= should be capitalized or added to the cost of the asset if directly attributable to the construction
acquisition or production of a QUALIFYING ASSET**. (Mandatory Capitalization)
**Qualifying asset = an asset that takes a substantial period of time to
get ready for the intended use or sale, such as Manufacturing plant,
Power generation facility, Intangible Asset, Investment Propety
= not included are:
1. Assets measured at fair value , such as BIOLOGICAL ASSETS
2. INVENTORY produced on a repetitive basis
3. Assets that are ready for their intended use or sale
when acquired

Note: A constructed building is a qualifying asset, but

A purchased building is NOT a qualifying asset

= all other borrowing cost is to be expensed outright

= capitalization of the borrowing cost starts when the 3 conditions are present
1. When the entity incurs expenditures for the asset
2. When the entity incurs borrowing cost
3. When the entity undertakes activities that are necessary to prepare the asset for the intended use
these include technical and administrative work prior to the commencement of physical
construction such as drawing up plans and obtaining permit for a building
= capitalization of the borrowing cost ends when substantially all the activities necessary to prepare
the qualifying asset for the intended use or sale are complete

Classifications of Borrowing Costs

1. Specific borrowing - funds borrowed specifically for the purpose of acquiring the qualifying asset

2. General Borrowing - funds borrowed generally, meaning only a part of it is used for the
acquiring of qualifying asset

Capitalizable Borrowing Costs

1. For Specific borrowing:
Capitalizable Borrowing cost =
Actual Borrowing cost or (Principal x Rate x time)
Less: Investment income from the temporary investment
of the fund borrowed
Borrowing cost Added to the Asset

2. For General borrowing:

Capitalizable Borrowing cost = Average Carrying Amount of asset
Multiply by: Capitalization rate**
Borrowing cost Added to the Asset

**Capitalization rate: Total annual borrowing cost

Total general funds borrowed

3. For Combined Specific borrowing and General borrowing:

Capitalizable Borrowing cost = Actual Borrowing cost or (Principal x Rate x time)
( from SPECIFIC ) Less: Investment income from the temporary investment
of the fund borrowed
Borrowing cost Added to the Asset

Capitalizable Borrowing cost = Average Carrying Amount of asset

( from GENERAL) Less: Specific fund borrowed
General fund borrowed
Multiply by: Capitalization rate**
Borrowing cost Added to the Asset
TOTAL BORROWING COST TO BE ADDED TO ASSET

COST of ppe ACTUAL EXPENDITURES

ADD: CAPITALIZABLE BC
Total cost of ppe
ly attributable costs
TEREST BEARING NOTE
XX

Notes payable XX

PVF PV
CASH 3,000 1 3000
NOTES PAYABLE 12,000 3,000 2.5 7500
15,000 10,500
be amortized over the

ed interest income in relation

effective interest method,

d, straight-line method

m Y by issuing 10,000 sh, par P100. The land has a market value of P1,500,000 on this date.
e currently traded in the market at P120 per share. Y bought the land 10 years ago at a cost of P750,000.

1 2
1,500,000 (10,000sh x 120) 1,200,000
ORD. SHARE CAP ( 10,000sh x P100) 1,000,000 1,000,000
Share Premium - ordinary shares 500,000 200,000

issuer/seller
EQUIPMENT
EQUIPMENT BONDS PAYABLE
 non-cash asset

t conditions)

s shall be charged DONATED CAPITAL / EXPENSE

CASH

sts necessary

onditions) like the GOVERNMENT

 NOTES PAYABLE
st is a government grant. DEFERRED INCOME

NOTES PAYABLE

benefit specific to an entity

e placed upon it

onstruct or acquire

entity recognizes

e period of the

333,333.33 250,000.00
333,333.33 250,000.00
 BUILDING 1,500,000
CASH 1,500,000

Depreciation expense 75,000

Accumulated depreciation 75,000
(1,500,000 /20 yrs)

BUILDING 1,500,000
CASH 1,500,000

urther related

hall be accounted
 income and any excess

ce to conditions

CASH 1,000,000
DEFERRED INCOME 1,000,000

BLDG 1,500,000
CASH 1,500,000

CASH 1,000,000
e been recognized BLDG 1,000,000

BLDG 1,500,000
CASH 1,500,000
 20 m forecasted
22 m actual
2m excess expenditure

ppe 20
expenses 2
cash 22

reign currency

he construction

cturing plant,

OGICAL ASSETS

asset for the intended use,

cement of physical
essary to prepare

e qualifying asset

PRINCIPAL 10M
xx RATE 10%
10YRS
xx 850K
xx 100

xx
xx
xx

xx

xx
xx

xx
XX
xx
xx
xx
xx
 3
(10,000sh x 100) 1,000,000
1,000,000
PROPERTY, PLANT AND EQUIPMENT (PAS 16)

SUBSEQUENT COST
Generally, recognized as outright expense.

**For PPE, if the subsequent cost merely maintains the existing level of the standard performance,
then OUTRIGHT EXPENSE

**For PPE, if the subsequent cost will increase the future service potential or future economic benefit
of the asset, then CAPITALIZE or ADD to the COST of asset.
Future economic benefit = extends life of the asset
= increases the capacity of the asset
= improves efficiency and safety of the asset

KINDS OF SUBSEQUENT COSTS FOR PPE

1 ADDITIONS
- these are modifications or alterations which increase the physical size or capacity of the asset
A. Entirely new unit = to be depreciated over new unit's useful life
B. Expansion, enlargement, extension of an OLD asset = to be depreciated over the
remaining useful life of the asset to which it is part OR the useful life of the expansion
whichever is shorter

- ADDED to the cost of the asset

2 IMPROVEMENTS or BETTERMENTS
- these are modifications or alterations which increase the service life or capacity of the asset
- these may represent replacement of an asset or part thereof with one of a BETTER or SUPERIOR quality
- ADDED to the cost of the asset

3 REPLACEMENTS
- these involve substitution but the new asset is not better than the old asset when acquired
3 CLASSIFICATION
1. Replacement of old asset by a new one = capitalizable as a new asset
2. Replacement of major parts = extra ordinary repair = ADDED to the cost of asset
3. Replacement of minor parts = ordinary repairs = Outright expense

IF the MAJOR part replacement is separately identifiable:

> debit the replacement to the PPE account @ current replacement cost which is discounted
ENTRY: PPE (@ current rep cost) XX
Cash XX

> dispose the replaced part

 ENTRY: Loss on retirement XX
Accumulated depreciation XX
PPE (@historical cost) XX

IF the MAJOR part replacement is NOT separately identifiable:

> debit the replacement to the PPE account @ current replacement cost which is discounted
ENTRY: PPE (@ replacement cost) XX
Cash XX

> dispose the replaced part

ENTRY: Loss on retirement XX
Accumulated depreciation XX
PPE (@replacement cost) XX

4 REPAIRS
- these are expenditures used to restore assets to good operating condition upon their breakdown
2 CLASSIFICATION
1. Extra ordinary repair = ADDED to the cost of asset
2. Ordinary repairs = Outright expense

- maintenance = is preventive or keeps the asset in good condition = Outright expense

5 REARRANGEMENT COST
- these are expenditures used to relocate or redeploy an existing PPE
- IFRS expressly mandates that costs of relocating existing PPE are EXPENSED as incurred
 eul 15 yrs eul 15 yrs
old 5yrs
remaining life 10yrs
NEW
eul 15yrs

ERIOR quality
R&M
PROPERTY, PLANT AND EQUIPMENT (PAS 16)

DEPRECIATION
> systematic allocation of the depreciable amount of an asset over the useful life
** Depreciable amount = Cost - Residual value

> a matter of cost allocation and NOT of valuation

> its objective is to have each period benefitting from the use of the asset bear an equitable share
of the asset cost

> ALL property, except for land, shall be depreciated on a systematic basis over the useful life
regardless of the earnings of the entity

> STARTS : when the asset is available for use

STOPS: when the asset is derecognized or disposed of
4 Ways to Derecognize
1. Sale 3. Retire
2. Exchange 4. Destroy

**Temporary idleness of the PPE does not stop depreciation

**If the PPE is reclassified to "held for sale", depreciation stops

> Financial statement presentation:

** an EXPENSE account which may be part of the Cost of goods Manufactured and/or
Operating Expense

ENTRY: Depreciation expense XX

Accumulated depreciation XX

FACTORS OF DEPRECIATION
1 Depreciable cost or amount
2 Residual value = also known as scrap value or salvage value
= estimated net amount currently obtainable if the asset is at the end of the useful life
3 Useful life = the period over which an asset is expected to be available for use by the entity

KINDS OF DEPRECIATION
1 Physical Depreciation = related to the wear and tear and deterioration caused by:
a. Wear and tear = frequency of use
b. Passage of time = non-use
 c. Action of elements such as wind, rain, dust
d. Casualty or accident such as fire, flood, earthquake
e. Disease or decay

2 Functional or Economic Depreciation = related to inadequacy, supersession and obsolescence

DEPRECIATION METHODS

1 STRAIGHT LINE METHOD (SLM)

Depreciation expense =
OR
Depreciation expense =
OR
Depreciation expense =
Cost - Residual value REMAINING BOOK VALUE - RE
Est. Useful life REMAINING EST USEFUL LIFE
Depreciable Cost
Est. Useful life
SLRate** x Depreciable Cost

**SLRate = 100%
Est. Useful life

>> this method is adopted when the principal cause of depreciation is PASSAGE OF TIME
>> this method considers function of time rather than function of usage
>> widely used for simplicity
>> constant charge over the useful life

2 COMPOSITE or GROUP METHOD

Depreciation expense = Composite Rate** x Total Cost

**Composite or Group Rate = Total Annual Depreciation

Total Cost

Composite life = Total Depreciable Amount

Total Annual Depreciation

>> composite method is for assets that are dissimilar in nature and are grouped and treated as unit
>> group method is for assets that are similar in nature and are grouped and treated as unit

>> the Accumulated depreciation under this method is not related to any specific asset
>> when an asset in the group is retired, no gain or loss is recognized
 ENTRY: Cash (net proceeds) XX
Accumulated depreciation XX
PPE (@ cost) XX
** the accumulated depreciation serves as the balancing figure

3 VARIABLE CHARGE or ACTIVITY METHODS

A. Output or Production Method
Depreciation expense = Depreciation Rate x Actual Units Produced

**Depreciation Rate = Depreciable Cost

(per unit) Est. total # of units to be produced

B. Working Hours Method

Depreciation expense = Depreciation Rate x Actual Hours Worked

**Depreciation Rate = Depreciable Cost

(per hour) Est. total # of hours to be worked

>> depreciation is more a function of use

4 SUM OF THE YEARS' DIGITS (SYD) METHOD

Depreciation expense = SYD Fraction x Depreciable Cost

**SYD Fraction = Numerator Life, from highest to lowest

Denominator = Life ( life + 1) 5(5+1)/2=
2

>> one of the methods under the decreasing charge or accelerated method
>> accelerated depreciation is on the philosophy that new assets are generally capable of producing
more revenue in the earlier years than in the later years

5 DOUBLE DECLINING BALANCE METHOD (DDBM)

Depreciation expense = DDBRate x Book Value

**DDBRate = SLRate x 2

6 INVENTORY METHOD
 Tools, beginning xx 100
Add: Tools purchases xx 40
Tools available for use xx 140
Less: Sale of used tools xx
Tool, end, should be xx 140
Less: Actual invty of tools xx 30
Depreciation expense xx 110

>>applied generally to assets which are small and inexpensive

>> no accumulated depreciation account is maintained

ENTRY: Depreciation expense XX

PPE (tools) XX

7 RETIREMENT METHOD
Depreciation expense = Original cost of the asset RETIRED
Less: Salvage Proceeds

>> no depreciation is recorded until the asset is Retired

8 REPLACEMENT METHOD
Depreciation expense = Replacement cost of the asset RETIRED
Less: Salvage Proceeds

>> no depreciation is recorded until the asset is Retired AND Replaced

CHANGE IN ACCOUNTING ESTIMATE

Change in useful life and Change in Depreciation method
>> the above changes shall be accounted as a change in accounting estimate which are to be
adjusted current and prospectively (future periods)
MAINING BOOK VALUE - RESIDUAL VALUE
MAINING EST USEFUL LIFE
1+2+3+4+5 15
GIVEN: COST REPLACEMENT
EQUIPMENT 3,000,000 4,800,000
ACCUMULATED DEPRECIATION 750,000
AGE OF ASSET YEARS 5 150,000
USEFUL LIFE OF ASSET YEARS 20

COST REPLACEMENT VARIANCE

EQUIPMENT 3,000,000 4,800,000 1,800,000
LESS: ACC DEP'N 25% 750,000 1,200,000 450,000
BOOK VALUE 2,250,000 3,600,000 1,350,000 1,350,000

1 UPON REVALUATION (JANUARY 1, 2021)

EQUIPMENT 1,800,000
ACCUMULATED DEPRECIATION 450,000
REVALUATION SURPLUS 1,350,000

DEPRECIATION FOR 2021 (DEC 31, 2021) PIECEMEAL REALIZATION

DEX =( C - SV)/EUL
= (RBV - SV)/REUL

Remaining book value, 1/1/21 3,600,000

Divided by: RemainingEUL (20-5) 15
Depreciation per year 240,000

Depreciation expense 240,000 BALANCE OF REVALUATI

Accumulated depreciation 240,000

CARRYING VALUE , 12/31/21

Cost 4,800,000
less: Accum. Dep 1,440,000
Book value/Carrying value 3,360,000
 DATE OF ACQ JAN1, 2016
DATE OF REVALUATION JAN 1, 2021

ECEMEAL REALIZATION
Revaluation surplus, 1/1/21 1,350,000
Divided by: Rem EUL 15
Realizatiion 90,000

Revaluation surplus 90,000

Retained earnings 90,000

ALANCE OF REVALUATION SURPLUS, 12/31/21

Revaluation surplus, 1/1/21 1,350,000
Less: Piecemeal real 90,000
Revaluation surplus, 12/31/21 1,260,000
GIVEN: COST REPLACEMENT
EQUIPMENT 6,500,000 9,200,000
RESIDUAL VALUE 500,000 200,000
ACCUMULATED DEPRECIATION 1,000,000 (c-sv)/eul
AGE OF ASSET YEARS 2
USEFUL LIFE OF ASSET YEARS 12

COST REPLACEMENT VARIANCE

EQUIPMENT 6,500,000 9,200,000 2,700,000
Less: Residual value 200,000 200,000 -
Depreciable cost 6,300,000 9,000,000 2,700,000
LESS: ACC DEP'N 16.67% 1,000,000 1,500,000 500,000
BOOK VALUE 5,300,000 7,500,000 2,200,000 2,200,000

1 UPON REVALUATION (JANUARY 1, 2021)

EQUIPMENT 2,700,000
ACCUMULATED DEPRECIATION 500,000
REVALUATION SURPLUS 2,200,000

DEPRECIATION FOR 2021 (DEC 31, 2021) PIECEMEAL REALIZATION

DEX =( C - SV)/EUL
= (RBV - SV)/REUL

Remaining book value, 1/1/21 7,500,000

Divided by: RemainingEUL (12-2) 10
Depreciation per year 750,000

Depreciation expense 750,000 BALANCE OF REVALUATI

Accumulated depreciation 750,000

CARRYING VALUE , 12/31/21

Cost 9,200,000
less: Accum. Dep 2,250,000
Book value/Carrying value 6,950,000
 DATE OF ACQ JAN1, 2019

DATE OF REVALUATION JAN 1, 2021

ECEMEAL REALIZATION
Revaluation surplus, 1/1/21 2,200,000
Divided by: Rem EUL 10
Realizatiion 220,000

Revaluation surplus 220,000

Retained earnings 220,000

ALANCE OF REVALUATION SURPLUS, 12/31/21

Revaluation surplus, 1/1/21 2,200,000
Less: Piecemeal real 220,000
Revaluation surplus, 12/31/21 1,980,000