Problem 2

Bugle Company’s property, plant, and equipment and related

accumulated depreciation accounts had the following balances at
December 31, 2006:

Class of PPE Cost

Accumulated
Depreciation
Land P3,900,000
Buildings 36,000,000
P7,962,000
Machinery and equipment 23,250,000
5,886,000
Transportation equipment 3,960,000
2,586,000
Lease improvements 6,630,000
3,315,000

Class of PPE Depreciation method

Useful Life
Land improvements Straight-line 12
years
Buildings 150% declining balance
25 years
Machinery and equipment Straight-line 10
years
Transportation equipment 150 % declining balance
5 years
Lease improvements Straight-line 8
years

Bugle computes depreciation to the nearest month. The salvage

values of the depreciable assets are considered immaterial.

Transactions during 2007 and other information are described

below:

1. On January 5, 2007, a plant facility consisting of land and a

building was purchased from Torotot Company for P18,000,000.
Of this amount, 20% was allocated to land.
2. On April 3, 2007, new parking lots, streets, and sidewalks at the
purchased plant facility were completed at a total cost of
 P5,760,000. These expenditures had an estimated useful life of
12 years.
3. The lease hold improvements were completed on December 31,
2003, and had an estimated useful life of 8 years. The related
lease, which would have terminated on December 31, 2009,
was renewable for an additional 4-year term. On April 30, 2007,
Bugle exercised the renewal option.
4. On July 1, 2007, machinery and equipment were purchased at
a total invoice cost of P7,500,000. Additional costs of P300,000
for delivery and P900,000 for installation were incurred.
5. On August 31, 2007, Bugle purchased a new automobile for
P450,000.
6. On September 29, 2007, a truck with a cost of P720,000 and a
carrying amount of P243,000 on the date of sale was sold for
P345,000. Depreciation for the 9 months ended September 30,
2007, was P70,560.
7. On December 22, 2007, a machine with a cost of P510,000 and
a carrying amount of P89,250 at date of disposition was
scrapped without cash recovery.

Based on the preceding information, calculate the 2007

depreciation expense on each of the following classes of PPE:

1. Land improvements
a. 480,000 b. 360,000 c. 320,000 d.
923,000

2. Buildings
a. 2,546,280 b. 3,024,000 c. 2,762,280
d. 1,682,280

3. Machinery and equipment

a. 2,325,000 b. 3,195,000 c. 1,597,500
d. 2,760,000

4. Transportation equipment
a. 363,132 b. 454,860 c. 433,962 d.
527,760

5. Leasehold improvements
a. 828,750 b. 552,500 c. 663,000 d.
1,326,000