Intermediate accounting by robles empleo ch 5 answers

Chapter 5- Property, Plant and Equipment
CHAPTER 5
PROPERTY, PLANT AND EQUIPMENT
PROBLEMS

5-1

(Uy Company)
Land
Office building
Warehouse
Manager’s
residence

5.2

5-3

(6,750,000
(6,750,000
120,000
(6,750,000
(6,750,000

x 2,187,500/5,625,000)
x 2,000,000/5,625,000) +

2,625,000
2,520,000

x 937,500/5,625,000)

x 500,000/5,625,000)

1,125,000
600,000

(Chang Corporation)
a.
720,000 x .90
b.
Down payment
Present value of 24 monthly installments
25,000 x 21.24
Total

P648,000
P150,000
531,000
P681,000

(Urban Corporation)
Land
Land purchase

P2,000,00
0
300,000
150,000

Demolition of old building
Legal fees for land acquisition

Building permit fees
Interest on loan for construction
Building construction costs
Assessment by the city government for
sewer connection
Landscaping costs*
Equipment purchased of use in excavation
Fixed overhead allocated to building
construction
Salvage from the demolished building
Sale of excavation equipment
Total costs

120,000

Land
Improvement
s

Building

P
80,000
270,000
5,000,000
P350,000
800,000
100,000

(70,000)

P2,500,00
0

P350,000

(640,000)
P5,610,000

Compensation for injury to construction worker is chargeable to loss; this expenditure
could have been avoided had the company obtained insurance on its workers. If an
insurance was acquired, the amount of premiums paid may be charged to the
building being constructed.
Profit on construction is not recognized anywhere in the accounts.
The selfconstructed asset should be charged for the actual costs incurred in its completion.
Modifications to the new building per instruction by the building inspectors is charged
to loss since this expenditure is not a necessary expense for the asset. This was
incurred as a result of the company’s negligence and could have been avoided had
proper planning been done.

30


Chapter 5- Property, Plant and Equipment

*Landscaping costs may be charged to the land account if there is an indication that
such an expenditure is permanent in nature.

5-4

(Doy Company)

Purchase price of land
Payments to tenants to vacate premises
Demolition of old building
Legal fees for purchase contract and recording ownership
Title guarantee insurance
Proceeds from sale of salvaged materials
Total

5-5

P4,000,000
200,000
100,000
50,000
20,000
(10,000)
P4,360,000

(Yu Corporation)
Land
I
m
pr
ov
e
m
en
ts
P 10,000

Balances, December 31, 2008
Cost of fencing the property
Paid to a contractor for building erected
Building permit fee
Excavation expenses
Architect’s fees
Invoice cost of machines acquired
Freight, unloading and delivery charges
Custom duties and other charges
Allowances, etc. to technicians during
installation
Balances, December 31, 2009

110,000

P120,000

Buildings

P
900,000
2,000,000
20,000
50,000
50,000

P3,020,00
0

Machinery

and
Equipment

P 980,000

2,000,000
60,000
140,000
400,000
P3,580,000

The interest of P150,000 is an imputed interest and is not recognized anywhere in the
financial statements.
The royalty payments of machines purchased is charged to operating expense for the
period.
5-6
50,000
55,000

a.

Cash price

b.

Downpayment

P215,000
P

Notes payable (35,000 x 3.1699)
Preference shares (500 x 110)
Cost of machine
P215,947

31

110,947


Chapter 5- Property, Plant and Equipment

c.
Purchase price
P22,000,000
Appraisal cost
Total cost to be allocated
Allocation:
Land
22,150,000 x 10,000/25,000
8,860,000
Building
22,150,000 x 12,500/25,000
11,075,000
Equipment
22,150,000 x 2,500/25,000
d.

25,095

150,000
P22,150,000
P
P
P 2,215,000

Cash price
800,000 x .90 x .98
Present value of the disposal costs
50,000 x 0.5019

P705,600

Cost of equipment

5.7

P730,695

(Planters Company and Producers Company)

Books of Planters Company
Cash
Equipment
Accumulated Depreciation-Building
Loss on Exchange of Building
Building

50,000
350,000

540,000
60,000
1,000,000

1,000,000-540,000 = 460,000 book value
460,000 – 400,000 = 60,000 loss

Books of Planters Company
Building
Accumulated Depreciation-Equipment
Cash
Gain on Exchange of Equipment
Equipment
600,000-320,000 = 280,000
280,000 – 350,000 = 70,000 gain

(Far East Company)
a.
Direct materials
P220,000
Direct labor
Overhead costs (125% x 150,000
Allocated fixed costs (20% 700,000)
140,000
Total before interest cost
Capitalized interest: (300,000 x 10% x 6/12)
15,000
Total cost of equipment
P712,500

400,000
320,000

50,000
70,000
600,000

5-8

b.

Average accumulated expenditures: (697,500/2)

32

150,000
187,500
P697,500

P348,500


Chapter 5- Property, Plant and Equipment
Capitalized interest:
300,000 x 10% x 6/12

15,000

P

48,750 x 16% x 6/12
Total capitalized interest

3,900
P

18,900
5-9

(Metro Company)
a.
4,000,000 x 10%
Less interest income earned on temporary investment of loan
( 85,000)
Capitalized interest
b.

40,000
c.

P400,000
P315,000

1,000,000 x 10%
1,000,000 x 10% x 9/12
1,000,000 x 10% x 6/12
1,000,000 x 10% x 3/12
Total interest
Less interest income earned on temporary investment of loan

P100,000
75,000
50,000
25,000
P250,000

Capitalized interest

P210,000

Computation of average accumulated expenditures:
400,000 x 12/12

P

400,000
1,000,000 x 9/12
750,000
1,200,000 x 5/12
500,000
1,000,000 x 3/12
250,000
400,000 x 0/12
Average accumulated expenditures
P1,900,000

Computation of weighted average interest rate:
(10% x 1,200,000) + (12% x 1,600,000)
1,200,000 + 1,600,000
Interest of specific borrowing:

1,600,000 x 10%
Less interest earned
Interest on general borrowing:
300,000 x 11.14%
Capitalized interest
d.

2,800,000 x 10%
1,600,000 x 10%
2,000,000 x 12%
Total interest on loans
P680,000
Less capitalized interest: (1,900,000 x 10.625%*)
Interest expense for 2008

----------

11.14%
P160,000
20,000

P140,000
33,420
P173,420
P280,000
160,000
240,000
201,875
P478,125

* 680,000 ÷ 6,400,000 = 10.625%
5-10

(Lim Company)
360,000 x 12/12

P 360,000

33


Chapter 5- Property, Plant and Equipment
600,000 x 7/12
350,000

a.

b.
144,000

1,500,000 x 6/12
1,500,000 x 1/12
Average accumulated expenditures

750,000
125,000
P1,585,000

Interest of specific borrowing (3,000,000 x 12%)
Less interest revenue earned from temporary investments of

specific borrowing
Capitalized interest

P 360,000

Interest on specific borrowing (1,200,000 x 12%

49,000
P 311,000

)

P

Less interest revenue earned from temporary
investments of specific borrowing
49,000
95,000

P
Interest on general borrowings
385,000* x 12.14%**
Capitalized interest

P

46,739
141,739

* 1,585,000 – 1,200,000 = 385,000

** 680,000 ÷ 5,600,000 = 12.14%
5-11

5-12

a.
Tooling Machine
Automobile
Gain on Exchange of Automobile
b.
Machine (new)
Accumulated Depreciation-Machine (old)
Loss on Exchange of Machine
Machine (old)
Cash
(850,000–340,000)-(1,200,000–
880,000)=190,000 loss
(Tan Company)
a.
Depreciation charges for 2008 and 2009
2008
a. SL
(800,000 – 80,000) / 8 = 90,000
90,000 x 9/12= 67,500
b. Hrs
720,000/100,000 hrs = 7.20/hr.
worked
7.20 x 4,500 hrs = 32,400
c. Units
720,000/900,000 units = 0.80/unit

of
080 x 40,000 units = 32,000
output
d. SYD
720,000 x 8/36 x 9/12 = 120,000
e. DDB

2/8 = 25%
25% x 800,000 x 9/12=150,000

f. 150%
DB

1.5/8 = 18.75%
18.75% x 800,000 x 9/12=
112,500

34

172,800
135,000
37,800
1,200,000
340,000
190,000
850,000
880,000

2009
90,000

7.20 x 5,500 hrs = 39,600
0.80 x 60,000 units =
48,000
720,000 x 7.25/36
=145,000
800,000150,000=650,000
25% x 650,000 = 162,500
800,000112,500=687,500
18.75% x 687,500) =
128,906


Chapter 5- Property, Plant and Equipment

b.

Carrying amount of the asset at the end of 2009
Depreciation Method
Cost
Accum. Depr.
a. Straight-line
b. Hours worked
c. Units of output
d. SYD
e. DDB
f. 150% declining
balance

5-13

(Real
a.
b.
c.

P30,000
P18,000

800,000
800,000
800,000
800,000
800,000
800,000

Carrying
amount
642,500
728,000
720,000
535,000
487,500
558,594

157,500
72,000
80,000
265,000
312,500
241,406

Company)
2/5 = 40%; 26,400 ÷ 40% = 66,000
12,000 x 5 years = 60,000; 66,000 – 60,000 = 6,000
Carrying amounts, end of year 3
Straight-line (66,000 – 36,000)
Sum-of-the-years digits(66,000 – 48,000

=

)

=

Double-declining balance (66,000 – 52,744)

=

P13,256
The method with the lowest carrying amount at time of sale will yield the
highest amount of gain on disposal.Therefore, the double-declining balance
method will provide the highest gain on disposal at the end of year 3.
5-14

5-15

(De Oro Company)
a.
Method 1 Straight-line method
Method 2 Sum-of-the-years digits method

320,000 ÷ 80,000 = 4 year life
320,000 x 4/10 = 128,000
320,000 x 3/10 = 96,000
Method 3 150% declining-balance method
1.5 ÷ 4 = 37.5%
37.5% x 340,000
=
37.5% x (340,000-127,500) =

127,500
79,688

b.

P80,000

Straight line method
Sum-of-the-years digits method
320,000 x 2/10
150% declining balance method
37.5% x (340,000-127,500-79,688)

(Citi Company)
a.
Depreciation Expense for 2008
Double-declining balance method
800,000 x 25% x ½
Sum-of-the-years digits method
720,000 x 8/36
x 1/2

Depreciation Expense for 2009
Double declining
700,000 x 25%

35

64,000
49,804

P100,000
80,000

P175,000


Chapter 5- Property, Plant and Equipment

Sum-of-the-years’ digits method

b.

720,000 x 8/36
x 1/2
P80,000
720,000 x 7/36 x ½
70,000
P150,000
Carrying (book) value at December 31, 2009
Double-declining balance method
Date

Depreciation Expense for the year
12/31/08
800,000 x 25% X ½ = P100,000
12/31/09
700,000 x 25%
= 175,000
Sum of the years’ digit method
Cost
Accumulated Depreciation, 12/31/09 (720,000 x 11.5/36)

230,000

Carrying value, 12/31/09

CV, end
P700,000
525,000
P800,000
P 570,000

5-16

(Total Company)
1.
The company changes to the sum-of-the-years digits method
Cost
Less accumulated depreciation (1,100,000 ÷ 10) x 4
440,000
Carrying amount of the asset, beginning of 5th year
760,000

Revised depreciation for the 5th year
760,000-100,000 = 660,000; 660,000 x 6/21
188,571
2.

It was estimated that the asset’s remaining life is 5 years.
Revised depreciation for the 5th year
(760,000 – 100,000) / 5 years

P1,200,000
P
P

P

132,000
5-17

(Chartered Company)
Cost
Less accumulated depreciation
18,000
Carrying amount, January 1, 2009

P 32,000
30,000 x

(5+4) / 15
P 14,000

Depreciation expense for 2009 (14,000 x 7/28)
3,500

P

5-18

(Standard Company)
Cost
P500,000
Less accumulated depreciation:
2005 20% x 500,000
100,000
2006 20% x 400,000
80,000
2007 20% x 320,000
64,000
2008 20% x 256,000
51,200
295,200
Carrying amount, January 1, 2009
P204,800
Depreciation expense for 2009
204,800 – 10,000 = 194,800; 194,800 ÷ 5 years
P 38,960

5.19

(Koh Trading)

36


Chapter 5- Property, Plant and Equipment
Carrying amount of the asset, January 1, 2009
Estimated remaining life in years
Depreciation expense for year ended December 31, 2009

÷

P153,600
8
P 19,200

5-20

(Carmi Company)
Cost
P378,000
Less: Accumulated Depreciation, August 1, 2009(378,000–35,000)/5 x 2
137,200
Carrying value, August 1, 2009
P240,800
Overhaul costs (capitalized)
80,000
Carrying value after overhaul
P320,800
Depreciation (August – December, 2009, see below
22,567
Carrying value, December 31, 2009

P298,233
Depreciation for 2009
(378,000 – 35,000)/5 x 7/12
(320,800 – 50,000) / (5 – 2) + 2 = 270,800 / 5 x 5/12
Total
5-21

5-22

(Chu, Inc.)
Accumulated depreciation at January 1, 2008 (528,000 x 4/8)
Revised depreciation expense for 2008
528,000-264,000 = 264,000; 264,000 / 2 yrs.
Accumulated depreciation at December 31, 2009
(Allied Company)

Purchase price
Residual value
Development costs incurred and capitalized during 2007
Depletable cost
Estimated supply of mineral resources
Depletion expense per ton
Number of tons removed during 2008
Depletion expense for 2008
Depletable cost, January 1, 2008 (see above)
Less depletion expense for 2008
Add development costs incurred and capitalized during 2009
Depletable cost for 2008
Revised estimated supply of mineral resource, 2009
Revised depletion rate per ton

Number of tons removed during 2009
Depletion expense for 2009

5.23

P40,017
22,567
P62,584

(Ong Exploration Company)

Purchase price
Development costs
Salvage value
Restoration costs at present value (2,500,000 x 0.4632)
Depletable cost
Estimated recovery from the property
Depletion rate per metric ton
Resources extracted during 2008
Depletion expense for 2008
Depletable cost, 2008 (see above)
Depletion expense for 2008
Development costs
New depletable cost for 2008

37

P264,000
132,000
P396,000

P4,450,000
( 650,000)
750,000
P4,550,000
÷3,500,000
P
1.30
x 550,000
P 715,000
P4,550,000
( 715,000)
961,000
P4,796,000
÷4,360,000
1.10
700,000
P 770,000
P

P45,000,000
1,500,000
( 6,000,000)
1,158,000
P41,658,000
÷10,000,000
P
4.1658
x 1,000,000
P 4,165,800
P41,658,000

( 4,165,800)
750,000
P38,242,200


Chapter 5- Property, Plant and Equipment
Remaining number of metric tons (9,250,000-1,000,000)
Revised depletion per metric ton
(rounded)
Number of metric tons removed during 2009
Depletion expense for 2009

5.24

÷ 8,250,000
P
4.64
x 1,500,000
P 6,960,000

(Family Mining Company)
Depletion rate per ton:
4,000,000 + 400,000 – 200,000
1,400,000 tons
Depreciation expense per ton:
300,000 – 20,000
1,400,000 tons
a.

P3.00

P0.20

Cost of ending inventory
2,000 units x 6 months
Production cost per unit
(8.00 + 3.00 + 0.20)
Ending Inventory, December 31, 2008

b.

Cost of goods sold
18,000 units x 6 months
Production cost per unit
Cost of goods sold for 2008

c.

Depletable cost in 2008
Less depletion expense for 2008
20,000 units x 6 months
Depletion rate per ton
New depletable cost for 2009
Revised estimated recovery at January 1, 2009
Revised depletion rate for 2009

12,000
x 11.20
P134,400
108,000
x 11.20

P1,209,600
P4,200,000
120,000
x 3.00

360,000
P3,840,000
÷ 800,000
P
4.80

Depreciable cost in 2008
P 280,000
Less depreciation expense for 2008 (120,000 units x 0.20)
24,000
Depreciable cost for 2009
P 256,000
Revised estimated recovery at January 1, 2009
÷ 800,000
Revised depreciation rate for 2009
P
0.32
5-25

(Yap Machine Shop)
a.
1. Cash
Accumulated Depreciation-Building
Loss on Disposal of Assets
Land

Building
2.

3.
4.

1,700,000
450,000
150,000

Cash
Accumulated Depreciation-Equipment
Loss on Disposal of Assets
Equipment

120,000
250,000
30,000

Equipment
Cash

298,000

800,000
1,500,000

400,000
298,000

Land
Income from Donated Asset

8,000,000
7,800,000

38


Chapter 5- Property, Plant and Equipment
Cash

200,000

5.

Land
Cash

240,000

6.

Equipment
Accumulated Depreciation-Equipment
Gain on Disposal of Assets
Equipment
Cash

150,000

15,000

7.

Building
Cash

b.
Beginning balance
(3)
(4)
(5)
(6)
(7)
Total
Balance

240,000

22,000
40,000
103,000
28,000,000
28,000,000

Property, Plant and Equipment (Net)
2,150,000 (1)
298,000 (2)
8,000,000
240,000

125,000
28,000,000
38,813,000 Total
36,813,000

1,850,000
150,000

2,000,000

5-26

(Pat Corporation)
a.
Depreciation and amortization expense for year ended December 31, 2009
Buildings
1.5/25 = 6%; (12,000,000-2,631,000) x 6%
P
562,140
Machinery and Equipment
Based on beginning balance (9,000,000 x 10%)
900,000
Less depreciation of machine destroyed
230,000 x 10% x 9/12
17,250
P 882,750
New machine
2,800,000 + 50,000 + 250,000=310,000
3,100,000 x 10% x 6/12
155,000

Total
P1,037,750
Automotive Equipment
Based on beginning balance
180,000
Less depreciation of car traded 180,000 x 2/10 36,000
P
144,000
New car
240,000 x 4/10
96,000
Total
P 240,000
Leasehold Improvement
1,680,000 x 8/80
P 168,000
b.

Gain ( loss) from disposal of assets
Car traded in
Fair value of car traded in
(240,000 – 200,000)
Book value of car traded
Machine destroyed by fire
Insurance recovery

39

P 40,000
54,000

P155,000

P(14,000)


Chapter 5- Property, Plant and Equipment
Book value of machine (230,000 x 4/10
63,000

)

92,000

Net gain from disposal of assets

P

49,000

5-27
a.
1/1/07

Equipment
Revaluation Surplus
Accumulated Depreciation
3,600,000-2,400,000 = 1,200,000 (50%
Inc.)
50% x 4,000,000 = 2,000,000
50% x 1,600,000 = 800,000

2,000,00
0

1,200,000
800,000

b.
12/31/0
7

Depreciation Expense

12/31/0
7

Revaluation Surplus

12/31/0
8

Depreciation Expense

12/31/0
8

Revaluation Surplus

c.
1/1/09

12/31/0
9

600,000

Accumulated Depreciation-Equipment
3,600,000 ÷ 6 yrs = 600,000

600,000
200,000

Retained Earnings
1,200,000 ÷ 6 yrs = 200,000

200,000
600,000

Accumulated Depreciation-Equipment

600,000
200,000

Retained Earnings

200,000

Accumulated Depreciation-Equipment
Revaluation Surplus
Equipment

600,000
400,000

Depreciation Expense

500,000

1,000,000

Accumulated Depreciation-Equipment
2,000,000 ÷ 4 yrs = 500,000

500,000

Revaluation Surplus
Retained Earnings
1,200,000-200,000-200,000400,000=400,000
400,000 ÷ 4 yrs = 100,000

Cost

Origin
al
4.000
M

1/1/07

1/1/07

+2.00
M

6.000
M

07-08
-

40

12/31/0
8
6.00M

100,000
100,000

1/1/09

1/1/09

-1.00M

5.00M

12//31/0
9
5.00M

Chapter 5- Property, Plant and Equipment
Accum

1.600
M
2.400
M

CV

5.28

+0.80
M
+1.20
M

2.400
M
3.600
M

+1.20
M
-1.20M

3.60M

-0.60M

3.00M

3.50M

2.40M

-0.40M

2.00M

1.50M

(Lu Company)
2009
Jan. 1

Dec. 31

Impairment Loss - Machinery
Accumulated Depreciation-Machinery
(450,000 ÷ 8 yrs) x 3 yrs. = 168,750
500,000 – 168,750 = 331,250
331,250 – 200,000 = 131,250

131,250

Depreciation Expense
Accumulated Depreciation-Machinery

(200,000 – 20,000)÷ 2 yrs. = 90,000

90,000

131,250

MULTIPLE CHOICE QUESTIONS
Theory
MC1
d
MC2

c

MC3

a

MC4

d

MC5

d

MC6

d

MC7

c

MC8

b

MC9

b

MC1
0

d

MC1
1
MC1
2
MC1
3
MC1
4
MC1
5
MC1
6
MC1

7
MC1
8
MC1
9
MC2
0

b
d
b
d
d

MC2
1
MC2
2
MC2
3
MC2
4
MC2
5

c
b
c
c
c

d
c
a
b
d

Problems
MC26
MC27
MC28
MC29
MC30

d
d
c
c
c

14,400,000 x 5/20 = 3,600,000
200,000 + 3,000 + 6,000 = 209,000
(800,000 – 20,000) x 12/78 x 9/12 = 90,000
780,000 x 11.25/78 = 112,500; 90,000 + 112,500 = 202,500
800,000 – 202,500 = 597,500

41

90,000

Chapter 5- Property, Plant and Equipment
MC31

a

MC32

c

MC33

c

MC34

c

MC35

a

MC36

a

MC37
MC38
MC39

d
c
a

MC40

c

MC41

b

MC42

a

MC43

b

MC44

c

MC45

d

MC46
MC47

a
d

MC48

c

MC49
MC50
MC51

b
b
c

MC52

a

MC53

d

MC54

b

4,500,000 + 30,000 + 6,000 + 40,000 + 60,000 = 4,636,000 Land
10,000 + 50,000 + 90,000 + 45,000 + 150,000 + 9,800,000 =

10,145,000 Building
1,800,000 x 10% = 180,000; 180,000 – 45,000 = 135,000
2,500,000 – 1,800,000 = 700,000
700,000 x 9% = 63,000; 135,000 + 63,000 = 198,000
4,000,000 x 10% x 6/12 = 200,000
750,000 x 12% x 6/12 = 45,000; 200,000 + 45,000 = 245,000
1,000,000 + (4,000,000÷ 2) = 3,000,000; 2,000,000 x 10% = 200,000
1,000,000 x 11% = 110,000; 200,000 + 110,000 = 310,000
4,500,000 + 1,320,000 + 77,000 + 53,000 = 5,950,000 total depreciable
cost
112,500 + 66,000 + 9,625 + 13,250 = 201,375 total depreciation
expense
5,950,000 ÷ 201,375 = 29.5 yrs.
4,800,000 + 1,400,000 + 82,000 + 53,000 = 6,335,000 total cost
201,375 ÷ 6,335,000 = 3.18%
4,500,000 ÷ 40 yrs. = 112,500
77,000 x 6/36 = 12,833
240,000 – 12,000 = 228,000; 228,000 ÷ 120 mos = 1,900 per mo
1,900 x 63 mos = 119,700
240,000 – 119,700 = 120,300; 120,300 – 130,000 = 9,700
270,000 x (8+7)/36 = 112,500
270,000 ÷ 8 = 33,750; 33,750 x 2 = 67,500
112,500 – 76,500 = 45,000
1.5/5 = 30% depreciation rate; 600,000 x 30% x ½ = 90,000
600,000 – 90,000 = 510,000; 510,000 x 30% = 153,000
90,000 x (5+4+3)/15 = 72,000 reported accum depreciation under SYD
90,000 x 2/15 = 12,000
240,000 ÷ 40 = 6,000; 240,000 x .90 x.90 x .10 = 19,440; 72,000 x 2/10
= 14,400
160,000/4 = 40,000; 400,000/40,000 = 10 years

240,000 – 40,000 = 200,000; 200,000 – 65,000 = 135,000
(900,000 – 300,000) / 3 yrs = 100,000
600,000 + 100,000 = 700,000
900,000 – 420,000 = 480,000; 480,000 – 300,000 = 180,000
42,000 x 55 = 2,310,000; 2,310,000/7 = 330,000; 330,000 + 5,000 =
335,000
49,200,000 – 43,755,000 = 5,445,000; 5,445,000 ÷ 4.5 years =
1,210,000/yr
1,210,000 x 40 yrs = 48,400,000; 49,200,000 – 48,400,000 = 800,000
20,500 – 6,000 = 14,500; 14,500 – 16,800 = 2,300
40,000 – 30,000 = 10,000; 20,000 – 10,000 = 10,000 Gain
54,000,000 – 6,000,000 + 7,200,000 = 55,200,000; 55,200,000 ÷
2,400,000 = 23
3,400,000 – 200,000 + 800,000 = 4,000,000
4,000,000 ÷ 4,000,000 = 1.00 per ton; 1.00 x 375,000 tons = 375,000
P0 for Quarry No. 1 since the asset is only being leased.
1,000,000 – 300,000 = 700,000; 700,000 ÷ 100 M = 0.007 per ton
0.007 x 1,380,000 = 9,660
.007 x 40,000,000 = 280,000; 700,000 – 280,000 = 420,000
420,000 ÷ 20,000,000 = 0.21; 0.21 x 1,380,000 = 28,980

42


Chapter 5- Property, Plant and Equipment
MC55

b

MC56

c

MC57

d

MC58

c

MC59

b

MC60

b

MC61

a

MC62
MC63

d
c

MC64

c

MC65

b

3,600,000 ÷ 800,000 = 4.50; 4.50 x 60,000 = 270,000
96,000 – 6,000 = 90,000; 90,000 ÷ 800,000 = 0.1125
0.1125 x 60,000 = 6,750
(8,600,000-600,000) ÷ 40 yrs = 200,000; 200,000 x 5 yrs. = 1,000,000
8,600,000-1,000,000-600,000 = 7,000,000; 7,000,000 ÷ 30 yrs =
233,333
8,000,000 – 1,000,000 – 233,333 = 7,366,667
7,500,000 – 7,366,667 = 133,333
160,000 x 10 yrs = 1,600,000; 4,000,000 – 1,600,000 = 2,400,000
3,240,000 – 2,400,000 = 840,000
4,000,000 ÷ 160,000 = 25 years; 25 – 10 = 15 years remaining
3,240,000 ÷ 15 = 216,000
160,000 x 9 yrs. = 1,440,000; 4,000,000 – 1,440,000 = 2,560,000
2,560,000 – 500,000 = 2,060,000; 2,060,000 ÷ 16 yrs. = 128,750
2,060,000 – 128,750 = 1,931,250; 3,240,000 – 1,931,250 = 1,308,950
160,000 – 128,750 = 31,250; 500,000 – 31,250 = 468,750
1,308,750 – 468,750 = 840,000
(360,000 ÷ 6) x 2.5 yrs = 150,000
360,000 – 150,000 = 210,000 book value; 210,000 – 70,000 = 140,000
loss
70,000 ÷ 3.5 remaining years = 20,000; 70,000 – 20,000 = 50,000
1,800,000 – 600,000 = 1,200,000; 600,000 ÷ 3 = 200,000
1,200,000 + 200,000 = 1,400,000

3,000,000 – 300,000 = 2,700,000; 2,700,000 ÷ 10 = 270,000
270,000 x 4 = 1,080,000
3,000,000 – 1,080,000 = 1,920,000; 1,920,000 – 900,000 = 1,020,000
1,920,000 ÷ 6 yrs = 270,000 or 2,700,000 ÷ 10 yrs = 270,000

43