8/11/2019 Financial Accounting chapter 16 - 20
http://slidepdf.com/reader/full/financial-accounting-chapter-16-20 1/70
210CHAPTER 16
Problem 16-1
1. C2. D3. D4. D5. B
Problem 16-2 Land Building
Cash paid for land and old building 1,000,000Removal of old building 50,000Pamen! !o !enan!s of old building !o va"a!e premises 15,000#r"hi!e"! fee 200,000Building permi! 30,000
$ee for !i!le sear"h 10,000%urve before "ons!ru"!ion 20,000&'"ava!ion 100,000Cos! of ne( building "ons!ru"!ed ),000,000#ssessmen! fee 5,000Cos! of grading, leveling and land*ll 45,000Drive(as and (al+s 40,000
emporar -uar!ers for "ons!ru"!ion "re( 0,000 emporar building !o house !ools and ma!erials )0,000Cos! of "ons!ru"!ion "hanges ///////// 50,000
1,145,000 ),5)0,000
Note: he "os! of repla"ing (indo(s is !rea!ed as e'pense.
Problem 16-3 Land
Land BuildingimprovementCos! of land 2,000,000egal fees 10,000Pamen! of mor!gage 50,000Pamen! of !a'es 20,000Cos! of raing building 30,000Pro"eeds from sale of ma!erials 5,000rading and drainage 15,000#r"hi!e"! fee 200,000Pamen! !o "on!ra"!or ,000,000n!eres! "os! 300,000
Drive(a and par+ing lo! 40,000Cos! of !rees, shrubs and o!her lands"aping 55,000Cos! of ins!alling ligh!s in par+ing lo! 5,000Premium for insuran"e /////// 25,000 ///////
2,120,000 ,525,000 100,000
he pamen! for medi"al bills and !he "os! of open house par! are ou!righ! e'pensesbe"ause !he are no! a ne"essar "os! of a"-uiring !he land and building.
8/11/2019 Financial Accounting chapter 16 - 20
http://slidepdf.com/reader/full/financial-accounting-chapter-16-20 2/70
211Problem 16-
!"#e $a#tor% Land Land building building
improvement&
Pur"hase pri"e 1,300,000 600,0007a!erials 3,200,000&'"ava!ion 100,000abor 2,500,000Remodeling 200,000Cash dis"oun!s )0,000%upervision 30,000Compensa!ion insuran"e 50,000Cleri"al and o!her e'penses 30,000Paving of s!ree!s 40,000Plans and spe"i*"a!ions 150,000egal "os! 8 land 10,000 //////// //////// //////
1,310,000 900,000 ),000,00040,000
1. he impu!ed in!eres! on "orpora!ion:s o(n mone is no! "api!aliable.2. he pamen! of "laim for in;uries no! "overed b insuran"e and !he legal "os! of in;ur
"laim are !rea!ed as e'pense.3. %aving on "ons!ru"!ion is no! re"ognied.
Problem 16-'
a'es in arrears 50,000Pamen! for land 1,000,000Demoli!ion of old building 100,000
o!al "os! of land 1,150,000
#r"hi!e"! fee 230,000Pamen! !o "i! hall 120,000Con!ra"! pri"e 5,000,000%afe! fen"e around "ons!ru"!ion si!e 35,000%afe! inspe"!ion on building
30,000Removal of safe! fen"e 20,000
o!al "os! of fa"!or building 5,435,000
Problem 1)8)
Pur"hase pri"e 3,000,000 i!le "learan"e fee 50,000
Cos! of raing old building 100,000%"rap value of old building 10,000 o!al "os! of land 3,140,000
Cons!ru"!ion "os! of ne( building ,000,000
8/11/2019 Financial Accounting chapter 16 - 20
http://slidepdf.com/reader/full/financial-accounting-chapter-16-20 3/70
212
Problem 16-(
Land BuildingPur"hase pri"e 1,000,000
4,000,000Remodeling 150,000%alvage ma!erials 5,000rading, leveling and o!her permanen! improvemen! 50,000Repairs //////// 10,000
1,050,0004,155,000
he repairs are "api!alied be"ause !he are ne"essar prior !o !he o""upan" andin!ended use of !he building.
Problem 16-)
Land Building*a#+iner%$air value 1,500,000 5,000,000Repairs 200,000Remodeling 300,000nvoi"e pri"e 1,000,000Dis"oun! 20,000Base ///////// ///////// 50,000
1,500,000 5,500,0001,030,000
he drive(a and par+ing lo! are "harged !o land improvemen!s.
Problem 16-, Land Building
*a#+iner%$air value 1,500,000 4,000,0001,500,000Repairs 200,000%pe"ial !a' assessmen! 30,000Pla!form 60,000Remodeling 400,000Pur"hase pri"e 00,000Dis"oun! 40,000$reigh! 20,000ns!alla!ion ///////// ///////// 30,000
1,530,000 4,)00,0002,30,000
Problem 16-10
Pur"hase pri"e 2,000,000 Con!ra"! pri"e ),000,000Commission 100,000 Plans, spe"i*"a!ion
8/11/2019 Financial Accounting chapter 16 - 20
http://slidepdf.com/reader/full/financial-accounting-chapter-16-20 4/70
egal fees 50,000 and blueprin! 100,000 i!le guaran!ee 10,000 #r"hi!e"!ural fee 250,000Cos! of raing old building 65,000 Cos! of ne( building ),350,000%alvage value of ma!erials 5,000Cos! of land 2,230,000
213
Problem 16-11 Lea&e+old
Land Building improvement&*a#+iner%
Balan"es, <an. 1 1,500,000 4,000,000 500,0001,000,000#"-uisi!ion of land 8 =)21> Pur"hase pri"e 3,000,000
Commission )0,000 Clearing "os! 15,000 %ale of !imber and gravel 5,000#"-uisi!ion of land 8 =)22>
Pur"hase pri"e 4,000,000 Cos! of demoli!ion 300,000?e( building>
Cons!ru"!ion "os! 5,000,000 &'"ava!ion fee 50,000 #r"hi!e"!ural design 150,000 Building permi! 40,000mprovemen!s> &le"!ri"al (or+ 350,000
Cons!ru"!ion e'!ension00,000 ' 1@2 400,000
mprovemen!s on oA"e spa"e )50,000Pur"hase of ne( ma"hine> nvoi"e pri"e 1,650,000 $reigh! 20,000 nloading "harge ///////// ///////// ///////// // 30,000Balan"es, De"ember 31 ,60,000 9,240,000 1,900,0002,00,000
he !hird !ra"! of land should be presen!ed as "urren! asse! be"ause i! (as "lassi*ed asheld for sale.
Problem 16-12 Land Land improvement& Building*a#+iner%
Balan"es, <an. 1 3,500,000 900,000 6,000,0001,500,000and a"-uired 1,250,000ssuan"e of share "api!al>
8/11/2019 Financial Accounting chapter 16 - 20
http://slidepdf.com/reader/full/financial-accounting-chapter-16-20 5/70
12@3) ' 4,500,000 1,500,000 24@3) ' 4,500,000 3,000,000?e( ma"hiner 3,400,000?e( par+ing lo!, s!ree! and
side(al+ 650,0007a"hiner sold //////// //////// ///////// 500,000
Balan"es, De". 31 ),250,000 1,)50,000 10,000,0004,400,000
he assessed values do no! represen! !he fair values of !he land and building bu! areused in allo"a!ing !he mar+e! value of !he share "api!al.
21
Problem 16-13 Problem 16-1
nvoi"e pri"e 3,000,000 nvoi"e "os! 4,000,000Cash dis"oun! 150,000 Dis"oun! 5E ' 4,000,000 200,000$reigh! 50,000 ranspor!a!ion 40,000
ns!alla!ion "os! 30,000 ns!alla!ion 100,000 es!ing "os! 20,000 rial run8salar of engineer 50,000
2,950,000 Cash allo(an"e )0,000 3,930,000
Problem 16-1'
Cos! paid 9),000 F 9),00000,000Cos! of !ranspor!ing ma"hine 30,000ns!alla!ion "os! 50,000
es!ing "os! 40,000%afe! rails and pla!form )0,000Ga!er devi"e 0,000
Cos! of ad;us!men! 65,000&s!ima!ed disman!ling "os! )5,000
o!al "os! of ma"hine 1,200,000
?o!e !ha! !he es!ima!ed disman!ling "os! is "api!alied be"ause !he "ompan has apre&ent obligation a& reuired b% #ontra#t. n !he absen"e of a presen! obliga!ion,!he es!ima!ed disman!ling "os! is no! "api!alied.
Problem 16-16
%e"ond hand mar+e! value 2,400,000Hverhaul and repairs 150,000ns!alla!ion 0,000
es!ing 110,000Iauling 10,000%afe! devi"e 250,000
3,000,000Problem 16-1(
1. 7a!erials )00,000 abor 400,000 ns!alla!ion )0,000
8/11/2019 Financial Accounting chapter 16 - 20
http://slidepdf.com/reader/full/financial-accounting-chapter-16-20 6/70
rial run 30,000 Dis"oun! 40,000 Hverhead 150,000
1,200,0002. #d;us!ing en!ries>
1. oss on re!iremen! of old ma"hiner ),000 7a"hiner 20,000 F 14,000),000
21' 2. Pur"hase dis"oun! 40,000 7a"hiner 40,000
3. 7a"hiner 150,000 $a"!or overhead 150,000
4. Pro*! on "ons!ru"!ion 100,000 7a"hiner 100,000
5. ools 90,000
7a"hiner 90,000
). Depre"ia!ion F !ools 10,000 ools 90,000 @ 3 ' 4@12 10,000
6. 7a"hiner 12,)00
#""umula!ed depre"ia!ion 40,000 Depre"ia!ion F ma"hiner ,)00
Depre"ia!ion re"orded 12,)00 Corre"! depre"ia!ion 1,200,000 @ 10 ' 4@12 40,000 Hverdepre"ia!ion ,)00
Problem 16-1)
ni!ial design fee 150,000&'e"u!ive "hairs and des+s 200,000%!orm (indo(s and ins!alla!ion 500,000ns!alla!ion of au!oma!i" door opening ss!em 200,000Hverhead "rane 350,000
o!al "api!al e'pendi!ures 1,400,000
Problem 16-1,1. #""umula!ed depre"ia!ion 400,000 oss on re!iremen! of building 1,)00,000 Building 2,000,000
Building 2,500,000Cash 2,500,000
Depre"ia!ion ,100,000 @ 20 405,000
8/11/2019 Financial Accounting chapter 16 - 20
http://slidepdf.com/reader/full/financial-accounting-chapter-16-20 7/70
#""umula!ed depre"ia!ion 405,000
Building 9,000,000 J 2,500,000 F 2,000,0009,500,000 #""umula!ed depre"ia!ion 1,00,000 F 400,0001,400,000
Boo+ value ,100,000
2. #""umula!ed depre"ia!ion 1,9)0,000 ' 20E 392,000 oss on re!iremen! of building 1,5),000
Building 2,500,000 ' .64 1,9)0,000
216
Building 2,500,000Cash 2,500,000
Depre"ia!ion ,132,000 @ 20 40),)00#""umula!ed depre"ia!ion 40),)00
Building 9,000,000 F 1,9)0,000 J 2,500,0009,540,000 #""umula!ed depre"ia!ion 1,00,000 F 392,0001,40,000 Boo+ value ,132,000
Problem 16-20
a. #nnual depre"ia!ion ,400,000 @ 30 20,000
#ge of building 6,000,000 @ 20,000 25 ears
b. Building 2,500,000Cash 2,500,000
". Building ,400,000 J 2,500,00010,900,000 ess> #""umula!ed depre"ia!ion 6,000,000 Boo+ value 3,900,000
d. Depre"ia!ion 3,900,000 @ 15 2)0,000#""umula!ed depre"ia!ion 2)0,000
Hriginal life30
ess> &'pired life 25 Remaining useful life, beginning of "urren! ear5 #dd> &'!ension in life 10 Revised useful life15
Problem 16-21
8/11/2019 Financial Accounting chapter 16 - 20
http://slidepdf.com/reader/full/financial-accounting-chapter-16-20 8/70
1. Building 10,500,000 Cash 10,500,000
2. Depre"ia!ion 200,000#""umula!ed depre"ia!ion 200,000
3. Building 3,000,000Cash 3,000,000
#""umula!ed depre"ia!ion 2,500,000 @ 50 ' 2 100,000 oss on re!iremen! of building 2,400,000
Cash 2,500,000
4. Depre"ia!ion 10,600,000 F 500,000 @ 4 212,500#""umula!ed depre"ia!ion 212,500
21(
Building 10,500,000 J 3,000,000 F 2,500,00011,000,000 #""umula!ed depre"ia!ion 400,000 F 100,000300,000 Boo+ value F 1@1@200 10,600,000
Problem 16-22
1. 7a"hiner 5,000,000Cash 5,000,000
2. Depre"ia!ion 450,000 #""umula!ed depre"ia!ion 450,000
3. Depre"ia!ion 3,)00,000 @ ) )00,000#""umula!ed depre"ia!ion )00,000
Cos! 5,000,000 #""umula!ed depre"ia!ion>
2005 450,000200) 450,000 900,000
Boo+ value 4,100,000 Residual value 500,000 Remaining depre"iable "os! F 1@1@2006 3,)00,000
4. 7a"hiner 300,000
Cash 300,000
5. Depre"ia!ion 3,300,000 @ 5 ))0,000 #""umula!ed depre"ia!ion ))0,000
Cos! 5,300,000 #""umula!ed depre"ia!ion 900,000 J )00,0001,500,000 Boo+ value F 1@1@200 3,00,000
8/11/2019 Financial Accounting chapter 16 - 20
http://slidepdf.com/reader/full/financial-accounting-chapter-16-20 9/70
Residual value 500,000 Remaining depre"iable "os! F 1@1@200 3,300,000
Problem 16-23
1. Depre"ia!ion )0,000 ' 3@12 15,000
#""umula!ed depre"ia!ion 15,000 #""umula!ed depre"ia!ion 40,000 J 15,000 495,000
oss on re!iremen! of s!ore e-uipmen! 105,000%!ore e-uipmen! )00,000
2. Depre"ia!ion 150,000 ' 4@12 50,000#""umula!ed depre"ia!ion 50,000
21)
Cash 100,000 #""umula!ed depre"ia!ion 1,050,000 J 50,000 1,100,000 oss on sale of oA"e e-uipmen! 300,000
HA"e e-uipmen! 1,500,000
3. Depre"ia!ion )00,000 ' 5@12 250,000#""umula!ed depre"ia!ion 250,000
Deliver e-uipmen! F ne( 5,000,000 #""umula!ed depre"ia!ion 2,)50,000 Cash 5,000,000 F 650,000 4,250,000
Deliver e-uipmen! F old 3,000,000
ain on e'"hange 650,000 F 350,000 400,000
Hriginal "os! 3,000,000 ess> #""umula!ed depre"ia!ion !o da!e 2,400,000 J 250,0002,)50,000 Boo+ value 350,000
4. #""umula!ed depre"ia!ion 1,200,000HA"e e-uipmen! 1,200,000
5. Depre"ia!ion 900,000 ' 9@12 )65,000#""umula!ed depre"ia!ion )65,000
#""umula!ed depre"ia!ion 2,600,000 J )65,000 3,365,000 $ire loss 1,125,000
7a"hiner 4,500,000
Problem 16-2
1. Dis"oun! on bonds paable 500,0007a"hiner 500,000
8/11/2019 Financial Accounting chapter 16 - 20
http://slidepdf.com/reader/full/financial-accounting-chapter-16-20 10/70
n!eres! e'pense 500,000 @ 10 ' 9@12 36,500Dis"oun! on bonds paable 36,500
#""umula!ed depre"ia!ion 65,000Depre"ia!ion 65,000
Depre"ia!ion for 9 mon!hs)00,000 Depre"ia!ion for 12 mon!hs )00,000 @ 9@12 00,000 Depre"iable "os! 00,000 ' 5 ears 4,000,000
Per boo/ Adu&ted Cos! 5,000,000 4,500,000 ess> Residual value 1,000,000 1,000,000 Depre"iable "os! 4,000,000 3,500,000
21,
Corre"! depre"ia!ion for 9 mon!hs 3,500,000 @ 5 ' 9@12525,000 ess> Depre"ia!ion re"orded )00,000 Hvers!a!emen! 65,000
2. n!eres! e'pense 300,0007a"hiner 3,500,000 F 3,200,000 300,000
7a"hiner 150,000$reigh! in 150,000
#""umula!ed depre"ia!ion 30,000Depre"ia!ion 30,000
Depre"ia!ion per boo+ 600,000 Corre"! depre"ia!ion 3,350,000 @ 5 )60,000 Hvers!a!emen! 30,000
3. oss on e'"hange 390,000
7a"hiner 390,000
Cos! per boo+ 3,000,000 Corre"! "os!
rade in value 150,000#dd> Cash paid 2,4)0,000 2,)10,000
Hvers!a!emen! 390,000
rade in value 150,000 ess> Boo+ value 540,000 oss on e'"hange 390,000
4. #llo(an"e for doub!ful a""oun!s 40,000 oss on e'"hange F a""oun!s re"eivable )0,000
8/11/2019 Financial Accounting chapter 16 - 20
http://slidepdf.com/reader/full/financial-accounting-chapter-16-20 11/70
reasur share900,000 Per boo/ 7a"hiner 4,200,000 #""oun!s re"eivable 4,200,000
reasur shares 4,200,0007a"hiner 4,200,000
+ould be 7a"hiner 3,300,000 #llo(an"e for doub!ful a""oun!s 20E ' 4,200,000 40,000 oss on a""oun!s re"eivable )0,000
#""oun!s re"eivable 4,200,000
220 reasur shares 3,300,000
7a"hiner 3,300,000
he "os! of !reasur shares a"-uired for noncash consideration is usuallmeasured b !he recorded amount of !he non"ash asse! surrendered %$#% ?o. 1.
Problem 16-2' An&er A
#llo"a!ed "os! of land 2,400,000 @ ),000,000 ' 5,500,0002,200,000Proper! !a'es 2,400 @ ),000 ' 250,000 100,000
Cos! of surve5,000
o!al "os! of land 2,305,000
n"iden!all, !he "os! of !he building is>
#llo"a!ed "os! 3,)00 @ ),000 ' 5,500,0003,300,000Proper! !a'es 3,)00 @ ),000 ' 250,000 150,000Renova!ion 500,000
o!al "os! of building 3,950,000
Problem 16-26 An&er A
Pur"hase pri"e 4,000,000Pamen!s !o !enan!s 200,000Demoli!ion of old building 100,000egal fees 50,000
i!le insuran"e30,000Pro"eeds from sale of ma!erials 10,000
8/11/2019 Financial Accounting chapter 16 - 20
http://slidepdf.com/reader/full/financial-accounting-chapter-16-20 12/70
o!al "os! of land 4,360,000
Problem 16-2( An&er
LandBuilding
Pur"hase pri"e of land )00,000egal fees for "on!ra"! 20,000#r"hi!e"! fee 0,000Demoli!ion of old building 50,000Cons!ru"!ion "os! /////// 3,500,000
o!al "os! )60,000 3,50,000
Problem 16-2) An&er
#"-uisi!ion pri"e 6,000,000Hp!ion of building a"-uired 200,000Repairs 500,000
o!al "os! 6,600,000
221
Problem 16-2, An&er
Pur"hase pri"e 250,000%hipping 5,000ns!alla!ion 10,000
es!ing 35,000
o!al "os! 300,000
Problem 16-30 An&er A
Problem 16-31 An&er A
#ll e'pendi!ures are "api!alied.
Problem 16-32 An&er A
#ll "os!s are "api!alied.
Problem 16-33 An&er C
Con!inuing and fre-uen! repairs 400,000Repain!ing of !he plan! building 100,000Par!ial repla"emen! of roof !iles 150,000Repair and main!enan"e e'pense )50,000
8/11/2019 Financial Accounting chapter 16 - 20
http://slidepdf.com/reader/full/financial-accounting-chapter-16-20 13/70
Problem 16-3 An&er B
Problem 16-3' An&er B
222
CHAPTER 1(
Problem 1(-1 Problem 1(-2
1. # 1. C 2. D 2. # 3. B 3. D 4. D 4. D 5. D 5. D ). D ). B 6. D 6. C . C . B 9. C 9. #10. B 10. #
Problem 1(-3
8/11/2019 Financial Accounting chapter 16 - 20
http://slidepdf.com/reader/full/financial-accounting-chapter-16-20 14/70
epre#iation Table 4 traig+t Line
A##umulated 5ear Parti#ular epre#iation depre#iation Boo/
value #"-uisi!ion "os! )35,000
200 120,000 120,000 515,0002009 120,000 240,000 395,0002010 120,000 3)0,000 265,0002011 120,000 40,000 155,0002012 120,000 )00,000 35,000
)00,000
epre#iation Table 4 ervi#e Hour& *et+od
A##umulated 5ear Parti#ular epre#iation depre#iation Boo/ value
#"-uisi!ion "os! )35,000
200 14,000 ' 10 140,000 140,000495,0002009 13,000 ' 10 130,000 260,000
3)5,0002010 10,000 ' 10 100,000 360,000
2)5,0002011 11,000 ' 10 110,000 40,000
155,0002012 12,000 ' 10 120,000 )00,000
35,000 )00,000
Depre"ia!ion ra!e per hour K )00,000 @ )0,000 K 10
223
epre#iation Table 4 Produ#tion *et+od
A##umulated 5ear Parti#ular epre#iation epre#iation Boo/ value
#"-uisi!ion "os! )35,000
200 34,000 ' 4 13),000 13),000 499,0002009 32,000 ' 4 12,000 2)4,000 361,0002010 25,000 ' 4 100,000 3)4,000 261,0002011 29,000 ' 4 11),000 40,000 155,0002012 30,000 ' 4 120,000 )00,000 35,000
)00,000
Depre"ia!ion ra!e per uni! of ou!pu! K )00,000 @ 150,000 K 4
8/11/2019 Financial Accounting chapter 16 - 20
http://slidepdf.com/reader/full/financial-accounting-chapter-16-20 15/70
epre#iation Table 4 um o 5ear&7 igit&
A##umulated 5ear Parti#ular epre#iation depre#iation Boo/ value #"-uisi!ion "os! )35,000200 5@15 ' )00,000 200,000 200,000
435,0002009 4@15 ' )00,000 1)0,000 3)0,000265,000
2010 3@15 ' )00,000 120,000 40,000155,000
2011 2@15 ' )00,000 0,000 5)0,00065,000
2012 1@15 ' )00,000 40,000 )00,00035,000
)00,000
%LD K 1 J 2 J 3 J 4 J 5 K 15
epre#iation Table 4 ouble e#lining Balan#e
A##umulated 5ear Parti#ular epre#iation depre#iation Boo/ value
#"-uisi!ion "os! )35,000200 40E ' )35,000 254,000 254,000
31,0002009 40E ' 31,000 152,400 40),400
22,)002010 40E ' 22,)00 91,440 496,40
136,1)02011 40E ' 136,1)0 54,)4 552,604
2,29)
2012 2,29) F 35,000 46,29) )00,000 35,000
)00,000
$i'ed ra!e K 100E @ 5 K 20E ' 2 K 40E
Problem 1(-
a. %!raigh! line me!hod>
200 26,5002009 55,000
22b. Gor+ing hours me!hod>
550,000Ra!e per hour K 8888888888888888888 K 11
50,000 hours
8/11/2019 Financial Accounting chapter 16 - 20
http://slidepdf.com/reader/full/financial-accounting-chapter-16-20 16/70
200 3,000 hours ' 11 33,0002009 5,000 hours ' 11 55,000
". Hu!pu! me!hod>
550,000
Ra!e per uni! K 88888888888888888888 K 2.65200,000 uni!s
200 1,000 uni!s ' 2.6549,500 2009 22,000 uni!s ' 2.65
)0,500d. %um of ears: digi!s>
10 J 1%LD K 10 888888888888 K 55
2
200 10@55 ' 550,000 ' )@12 50,000
2009 <an. 18<une 30 50,000 <ul 18De". 31 9@55 ' 550,000 ' )@1245,000 95,000 e. Double de"lining balan"e>
200 560,000 ' 20E ' )@1256,000 2009 560,000 F 56,000 ' 20E 102,)00
Problem 1(-'
$i'ed ra!e K 1.00 8 .5)23 or .4366
200 500,000 ' .4366 21,502009 500,000 F 21,50 ' .4366 123,0592010 500,000 8 341,909 ' .4366 )9,19)2011 500,000 F 411,105 F 50,0003,95
450,000
Problem 1(-6
a. um o %ear&7 digit
#pril 1, 200 F 7ar"h 31, 2009 1,00,000 ' @3)240,000 #pril 1, 2009 F 7ar"h 31, 2010 1,00,000 ' 6@3)
210,000
22'
Depre"ia!ion from #pril 1 !o De"ember 31, 200 240,000 ' 9@12 10,000
8/11/2019 Financial Accounting chapter 16 - 20
http://slidepdf.com/reader/full/financial-accounting-chapter-16-20 17/70
Depre"ia!ion for 2009>
<anuar 1 F 7ar"h 31 240,000 ' 3@12 )0,000#pril 1 F De"ember 31 210,000 ' 9@12 156,500
216,500b. ouble de#lining balan#e
$i'ed ra!e K 100 @ K 12.5 ' 2 K 25E
200 1,200,000 ' 25E ' 9@12 225,000 2009 1,200,000 F 225,000 ' 25E243,650
Problem 1(-(
a. ervi#e +our& met+od8
9)0,000 F )0,000Depre"ia!ion ra!e per hour K 8888888888888888888888888888 K 112.50
,000 hours
200 1,000 hours ' 112.50112,500 2009 2,000 hours ' 112.50
225,000
b. um o %ear&7 digit&8
%um of half years K 45
200 9@45 ' 900,000 ' 3@)90,000
2009 <anuar 1 F 7ar"h 31 9@45 ' 900,000 ' 3@)90,000 #pril 1 F %ep!ember 30 @45 ' 900,0001)0,000 H"!ober 1 F De"ember 31 6@45 ' 900,000 ' 3@) 60,000
320,000
Problem 1(-)
a. Ra!e per uni! 900,000 @ 10,0005.00
200 5,000 ' 5 25,0002009 20,000 ' 5 100,000
b. Double de"lining balan"e>
$i'ed ra!e 100E @ ' 225E
200 920,000 ' 25E ' )@12115,000
8/11/2019 Financial Accounting chapter 16 - 20
http://slidepdf.com/reader/full/financial-accounting-chapter-16-20 18/70
2009 920,000 F 115,000 ' 25E 201,250
226". %um of ears: digi!s>
<ul 1 F De"ember 31, 200 900,000 ' @3) ' )@12 100,000
<anuar 1 F <une 30, 2009 900,000 ' @3) ' )@12100,000 <ul 1 F De"ember 31, 2009 900,000 ' 6@3) ' )@12 6,500 Depre"ia!ion for 2009 16,500
Problem 1(-, epre#iable Lie in
AnnualA&&et& Co&t alvage #o&t %ear&depre#iation
7a"hiner 310,000 10,000 300,000 5 )0,000HA"e e-uipmen! 110,000 10,000 100,000 10 10,000Building 1,)00,000 100,000 1,500,000 15 100,000Deliver e-uipmen! 430,000 30,000 400,000 4 100,000
2,450,000 2,300,000 260,000
a. Composi!e ra!e K 260,000 @ 2,450,000 K 11.02E
b. Composi!e life K 2,300,000 @ 260,000 K .52 ears
". Depre"ia!ion 260,000#""umula!ed depre"ia!ion 260,000
Problem 1(-10
epre#iable Lie in AnnualA&&et& Co&t alvage #o&t%ear& depre#iationBuilding ),100,000 100,000 ),000,000 20
300,0007a"hiner 2,550,000 50,000 2,500,000 5500,000&-uipmen! 1,030,000 30,000 1,000,000 10 100,000
9,)0,000 9,500,000900,000
a. Composi!e depre"ia!ion ra!e K 900,000 @ 9,)0,000 K 9.3E
b. #verage life K 9,500,000 @ 900,000 K 10.5) ears
". Depre"ia!ion 900,000#""umula!ed depre"ia!ion 900,000
d. Cash 40,000
8/11/2019 Financial Accounting chapter 16 - 20
http://slidepdf.com/reader/full/financial-accounting-chapter-16-20 19/70
#""umula!ed depre"ia!ion 2,510,0007a"hiner 2,550,000
e. Depre"ia!ion ))3,090#""umula!ed depre"ia!ion 9,)0,000 F 2,550,000 ' 9.3E
))3,090
22(Problem 1(-11
2003 <an. 1 7a"hiner 900,000
Cash 900,000
De". 31 Depre"ia!ion 20E ' 900,000 10,000#""umula!ed depre"ia!ion 10,000
200De". 31 Depre"ia!ion 10,000
#""umula!ed depre"ia!ion 10,000
200'De". 31 Depre"ia!ion 10,000
#""umula!ed depre"ia!ion 10,000
2006De". 31 Depre"ia!ion 10,000
#""umula!ed depre"ia!ion 10,000
Cash 10,000
#""umula!ed depre"ia!ion 160,0007a"hiner 4 ' 45,000 10,000
200(De". 31 Depre"ia!ion 620,000 ' 20E 144,000
#""umula!ed depre"ia!ion 144,000
Cash 15,000 #""umula!ed depre"ia!ion )15,000
7a"hiner 14 ' 45,000 )30,000
200)De". 31 Depre"ia!ion 9,000
#""umula!ed depre"ia!ion 9,000
Remaining "os! 90,000 ess> Balan"e of a""umula!ed depre"ia!ion 69,000
Boo+ value 11,000 ess> %alvage pro"eeds 2,000 7a'imum depre"ia!ion 9,000
Cash 2,000
8/11/2019 Financial Accounting chapter 16 - 20
http://slidepdf.com/reader/full/financial-accounting-chapter-16-20 20/70
#""umula!ed depre"ia!ion ,0007a"hiner 4 ' 45,000 90,000
22)Problem 1(-12
1. Hld ma"hiner overhauled 240,000 J )0,000 300,000 #""umula!ed depre"ia!ion
2005 240,000 @ 30,000 200) 30,000 2006 30,000 o!al 90,000 Boo+ value F <anuar 1, 200 210,000
Hld ma"hiner overhauled 210,000 @ 6 ears 30,000
Remaining "os! of old ma"hiner 1,152,000 F 240,000 @ 114,000 ?e( ma"hiner 4)0,00 @ ' 5@12 24,000 o!al depre"ia!ion 1),000
2. Hld ma"hiner 1,152,000 ?e( ma"hiner 4)0,00 Cos! of overhaul )0,000 o!al "os! 1,)62,00 #""umula!ed depre"ia!ion>
Balan"e F <anuar 1 432,000Depre"ia!ion for 200 1),000
)00,000 Boo+ value F De"ember 31, 200
1,062,00
Problem 1(-13
7ain ma"hine 6,500,000 @ 10 650,000$irs! "omponen! F from <anuar 1 !o #pril 1, 200 1,200,000 @ ) ' 3@1250,000%e"ond "omponen! F from #pril 1 !o De"ember 31, 2009
2,000,000 F 400,000 @ 4 ' 9@12 300,000 o!al depre"ia!ion for 200 1,100,000
he se"ond "omponen! is depre"ia!ed over !he remaining life of !he main ma"hine. heoriginal life is 10 ears and ) ears alread e'pired. hus, !he remaining life is 4 ears.
Problem 1(-1
1. ools 40,000Cash 40,000
2. ools 20,000
Cash 20,000
8/11/2019 Financial Accounting chapter 16 - 20
http://slidepdf.com/reader/full/financial-accounting-chapter-16-20 21/70
3. Cash 4,000 ools 4,000
4. Depre"ia!ion 4),000 ools 4),000
Balan"e of !ools a""oun! 19),000 ess> &s!ima!ed "os! on De"ember 31 150,000 Depre"ia!ion 4),000
22,
Problem 1(-1'
Retirement met+od
7ar"h 1 &le"!ri" me!ers 250,000Cash 250,000
1 Cash 20,000Depre"ia!ion 1)0,000
&le"!ri" me!ers 10,000
<ul 1 &le"!ri" me!ers 400,000Cash 400,000
De"ember 1 &le"!ri" me!ers 200,000Cash 200,000
1 Cash 15,000 Depre"ia!ion 135,000
&le"!ri" me!ers 150,000
Repla#ement met+od
7ar"h 1 Depre"ia!ion 250,000 F 20,000 230,000Cash 230,000
<ul 1 &le"!ri" me!ers 400,000Cash 400,000
De"ember 1 Depre"ia!ion 200,000 F 15,000 15,000Cash 15,000
Problem 1(-16
Retirement met+od
200) ools 120,000 Cash 120,000
Cash 300 ' 50 15,000
Depre"ia!ion 45,000 ools 300 ' 200 )0,000
8/11/2019 Financial Accounting chapter 16 - 20
http://slidepdf.com/reader/full/financial-accounting-chapter-16-20 22/70
200, ools 3)0,000 Cash 3)0,000
Cash 600 ' 60 49,000 Depre"ia!ion 111,000
ools 1)0,000
230
500 ' 200 100,000 200 ' 300 )0,000 Cos! of !ools re!ired 1)0,000
Repla#ement met+od
200) ools 100 ' 300 30,000Depre"ia!ion 300 ' 30 90,000
Cash 120,000
Cash 15,000 Depre"ia!ion 15,000
200, ools 200 ' 400 0,000 Depre"ia!ion 600 ' 400 20,000 Cash 3)0,000
Cash 49,000 Depre"ia!ion 49,000
9nventor% met+od
200) ools 120,000Cash 120,000
Cash 15,000 ools 15,000
Depre"ia!ion 2)5,000 F 200,000 )5,000 ools )5,000
200, ools 3)0,000 Cash 3)0,000
Cash 49,000 ools 49,000
Depre"ia!ion 511,000 8 350,000 1)1,000 ools 1)1,000
Problem 1(-1(
8/11/2019 Financial Accounting chapter 16 - 20
http://slidepdf.com/reader/full/financial-accounting-chapter-16-20 23/70
1. and 350,000 J 450,00000,000
and a"-uired 30,000 J 25,000 J 45,000 450,000
2. Depre"ia!ion of land improvemen!s 10,000 @ 15 12,000
3. Depre"ia!ion of building 4,500,000 F 1,050,000 ' 6.5E25,650
2314. Depre"ia!ion of ma"hiner and e-uipmen!
1,1)0,000 F )0,000 @ 10 110,000300,000 @ 10
30,000 )0,000 @ 10 ' )@123,000
143,000
5. $i'ed ra!e 100E @ 3 ' 1.5
50E
1,00,000 F 1,344,000 ' 50E22,000
Problem 1(-1)
1. Beginning balan"e 65,000 #"-uisi!ion 150,000 @ 650,000 ' 1,250,000250,000 o!al "os! of land 1,125,000
e"hni"all, !he land for unde!ermined use is an inves!men! proper!.
2. Hld 6,500,000 F 1,)44,500 ' E4),440
?e( )00,000@650,000 ' 1,250,000 K 1,000,000 ' E0,000 Depre"ia!ion F building 54,440
3. 2,250,000 @ 10 225,000 400,000 @ 10 ' )@1220,000 Depre"ia!ion F ma"hiner 245,000
4. Depre"ia!ion F leasehold improvemen!s 21),000 F 10,000 @ 5 ears21,)00 5. Depre"ia!ion F land improvemen!s 192,000 @ 12 ' 9@1212,000
Problem 1(-1,
8/11/2019 Financial Accounting chapter 16 - 20
http://slidepdf.com/reader/full/financial-accounting-chapter-16-20 24/70
1. Hld building 4,)62,200 ' 10E 4)6,220?e( building
Dire"! "os! 2,220,000 $i'ed 15,000 ' 25 365,000 Mariable 15,000 ' 26 405,000 o!al "os! 3,000,000
3,000,000 ' 10E 300,000 o!al depre"ia!ion 6)6,220
$i'ed ra!e 100 @ 20 ' 2 10E
232
2. Hld ma"hiner 1,30,000 @ 10 13,000 ?e( ma"hiner
nvoi"e "os! 35),000Con"re!e embedding 1,000Gall demoli!ion 6,000Rebuilding of (all 19,000
o!al "os! 400,000 400,000 @ 10 ' )@1220,000 o!al depre"ia!ion 15,000
Problem 1(-20 An&er A
Cos! of ma"hiner "ash pri"e 1,100,000ess> Residual value 50,000Depre"iable "os! 1,050,000
%!raigh! line depre"ia!ion 1,050,000 @ 10 105,000
Problem 1(-21 An&er B
%ales pri"e 2,300,000Boo+ value> Cos! 4,200,000
#""umula!ed depre"ia!ion 3,)00,000 @ 5 ' 3 2,1)0,000 2,040,000ain 2)0,000
Problem 1(-22 An&er B
#""umula!ed depre"ia!ion F 12@31@2006 3,600,000#dd> Depre"ia!ion for 200 550,000
o!al 4,250,000
8/11/2019 Financial Accounting chapter 16 - 20
http://slidepdf.com/reader/full/financial-accounting-chapter-16-20 25/70
ess> #""umula!ed depre"ia!ion on proper!, plan! and e-uipmen! re!iremen!s s-ueee 250,000#""umula!ed depre"ia!ion F 12@31@200 4,000,000
Problem 1(-23 An&er B
epre#iable Annual Co&t alvage #o&t Liedepre#iation# 550,000 50,000 500,000 20 25,000B 200,000 20,000 10,000 15 12,000C 40,000 40,000 5 ,000
690,000 620,000 45,000
Composi!e life K 620,000 @ 45,000 1) ears
233
Problem 1(-2 An&er
nvoi"e pri"e 4,500,000Cash dis"oun! 2E ' 4,500,000 90,000Deliver "os! 0,000ns!alla!ion and !es!ing 310,000
o!al "os! 4,00,000%alvage value 00,000Depre"iable "os! 4,000,000
Ra!e per uni! 4,000,000 @ 200,000 20
Depre"ia!ion for 200 30,000 ' 20)00,000
Problem 1(-2' An&er B
Cos! 4,000,000#""umula!ed depre"ia!ion
2006 @3) ' 3,)00,000 00,000 200 6@3) ' 3,)00,000 600,0001,500,000Boo+ value, 12@31@200 2,500,000
Problem 1(-26 An&er B
he *rs! !hree fra"!ions are>
200) 10@552006 9@55200 @55
hus, !he 200 depre"ia!ion of P240,000 is e-ual !o @55.
8/11/2019 Financial Accounting chapter 16 - 20
http://slidepdf.com/reader/full/financial-accounting-chapter-16-20 26/70
Depre"iable "os! 240,000 @ @55 1,)50,000%alvage 50,000
o!al "os! 1,600,000
Problem 1(-2( An&er B
#pril 1, 200) !o 7ar"h 31, 2006 5@15 ' 3,000,0001,000,000#pril 1, 2006 !o 7ar"h 31, 200 4@15 ' 3,000,00000,000#""umula!ed depre"ia!ion, 7ar"h 31, 200 1,00,000
Problem 1(-2) An&er A
he a""umula!ed depre"ia!ion on De"ember 31, 2006 is re"ompu!ed follo(ing a "er!ainme!hod. he same is arrived a! follo(ing !he %LD as follo(s>
%LD K 1 J 2 J 3 J 4 J 5 K 15
23
2005 5@15 ' 900,000300,000
200) 4@15 ' 900,000240,000
2006 3@15 ' 900,00010,000
#""umula!ed depre"ia!ion F 12@31@2006 620,000
#""ordingl, !he %LD is follo(ed for 200.
200 depre"ia!ion 2@15 ' 900,000120,000
Problem 1(-2, An&er B
%!raigh! line ra!e 100E @ ears 12.5E$i'ed ra!e 12.5 ' 2 25E2006 depre"ia!ion 1,20,000 ' 25E
320,000200 depre"ia!ion 1,20,000 F 320,000 ' 25E 240,000
Problem 1(-30
1. 4,000,000 F 2,5)0,000 ' 40E An&er 56),000
2. 1,00,000 ' 2@15 %LD An&er A 240,000
3. %ales pri"e 1,600,000 Boo+ value 2,00,000 F 1,344,0001,45),000 ain An&er A 244,000
8/11/2019 Financial Accounting chapter 16 - 20
http://slidepdf.com/reader/full/financial-accounting-chapter-16-20 27/70
Problem 1(-31 An&er B
%!raigh! line ra!e 100E @ 5 ears 20E$i'ed ra!e 20E ' 2 40E
200) depre"ia!ion 5,000,000 ' 40E2,000,0002006 depre"ia!ion 3,000,000 ' 40E1,200,000#""umula!ed depre"ia!ion, De"ember 31, 2006 3,200,000Depre"ia!ion for 200 F s!raigh! line 5,000,000 F 3,200,000 @ 3)00,000#""umula!ed depre"ia!ion, De"ember 31, 200 3,00,000
Problem 1(-32 An&er A
Cos! F 1@1@2005 6,200,000#""umula!ed depre"ia!ion F 12@31@2006 6,200,000 @ 10 ' 3 2,1)0,000
Boo+ value F 12@31@2006 5,040,000
%LD for !he remaining life of 6 ears 1 J 2 J 3 J 4 J 5 J ) J 62
Depre"ia!ion for 200 5,040,000 ' 6@2 1,2)0,000
Problem 1(-33 An&er B
#nnual depre"ia!ion 1,53),000 @ 192,000
23'
Problem 1(-3 An&er B
$i'ed ra!e 100E @ 4 ' 2 50E
Cos! ),000,000Depre"ia!ion for 2006 50E ' ),000,000 3,000,000Boo+ value F 1@1@200 3,000,000Residual value )00,0007a'imum depre"ia!ion in 200 2,400,000
$i'ed ra!e in 200 100E @ 2 ' 2 100E
his means !ha! !he "ompu!ers should be full depre"ia!ed in 200. %in"e !here is aresidual value of P)00,000, !he ma'imum depre"ia!ion for 200 is e-ual !o !he boo+value of P3,000,000 minus !he residual value of P)00,000 or P2,400,000.
8/11/2019 Financial Accounting chapter 16 - 20
http://slidepdf.com/reader/full/financial-accounting-chapter-16-20 28/70
236
CHAPTER 1)
Problem 1)-1 Problem 1)-2
1. D 1. B2. # 2. C3. # 3. C4. C 4. C5. # 5. D
Problem 1)-3
1. Hre proper! 5,000,000 Cash 5,000,000 2. Hre proper! 3,000,000 Cash 3,000,000
3. 7a"hiner 4,000,000Cash 4,000,000
4. Deple!ion 1,140,000
8/11/2019 Financial Accounting chapter 16 - 20
http://slidepdf.com/reader/full/financial-accounting-chapter-16-20 29/70
#""umula!ed depre"ia!ion 1,140,000
,000,000 F 400,000 K 6,)00,0006,)00,000 @ 2,000,000 K 3.0300,000 ' 3.0 K 1,140,000
5. Depre"ia!ion )00,000#""umula!ed depre"ia!ion )00,000
4,000,000 @ 2,000,000 K 2.00300,000 ' 2.00 K )00,000
Problem 1)-
200) Ro"+ and gravel proper! 9)0,000Cash 9)0,000
Deple!ion 1,000,000 ' .40 400,000#""umula!ed deple!ion 400,000
200, Ro"+ and gravel proper! 490,000Cash 490,000
Deple!ion )00,000 ' .65 450,000#""umula!ed deple!ion 450,000
23(
o!al "os! 9)0,000 J 490,000
1,450,000ess> #""umula!ed deple!ion 400,000Deple!able "os! 1,050,000Divide b es!ima!ed remaining ou!pu! 2,400,000 F 1,000,000 1,400,000Revised deple!ion ra!e per !on .65
2010 Ro"+ and gravel proper! 500,000Cash 500,000
Deple!ion 600,000 ' .44 30,000#""umula!ed deple!ion 30,000
o!al "os! 1,450,000
#dd> #ddi!ional developmen! "os! 500,000 o!al 1,950,000ess> #""umula!ed deple!ion 400,000 J 450,000
50,000 Remaining deple!able "os!1,100,000
Divide b ne( es!ima!ed remaining ou!pu!2,500,000
?e( deple!ion ra!e .44
8/11/2019 Financial Accounting chapter 16 - 20
http://slidepdf.com/reader/full/financial-accounting-chapter-16-20 30/70
Problem 1)-'
200) Resour"e proper! 3,9)0,000Cash 3,9)0,000
Building 9)0,000
&-uipmen! 1,240,000Cash 2,200,000
Deple!ion 12,000 ' 32 34,000#""umula!ed deple!ion 34,000
Cos! of resour"e proper! 3,9)0,000ess> Residual value
120,000 Deple!able "os!3,40,000
Divide b es!ima!ed ou!pu! 120,000Deple!ion ra!e per uni! 32
Depre"ia!ion 12,000 ' 9),000#""umula!ed depre"ia!ion F building 9),000
9)0,000Depre"ia!ion ra!e per uni! K 8888888888888888 K
120,000
he ou!pu! me!hod is used in "ompu!ing !he depre"ia!ion of !he buildingbe"ause !he life of !he resour"e proper! 5 ears or 120,000 @ 24,000 is
shor!er !han !he life of !he building ears.
23)Depre"ia!ion 310,000
#""umula!ed depre"ia!ion 310,0001,240,000 @ 4 ears K 310,000
he s!raigh! line me!hod is used for !he heav e-uipmen! be"ause !he life of4 ears is shor!er !han !he life of !he resour"e proper! of 5 ears.
200, Deple!ion 00,000#""umula!ed deple!ion 25,000 ' 32 00,000
Depre"ia!ion 25,000 ' 200,000
#""umula!ed depre"ia!ion F building 200,000
Depre"ia!ion 310,000#""umula!ed depre"ia!ion F e-uipmen! 310,000
Problem 1)-6
200) Hre proper! 5,400,000Cash 5,400,000
8/11/2019 Financial Accounting chapter 16 - 20
http://slidepdf.com/reader/full/financial-accounting-chapter-16-20 31/70
Hre proper! 450,000&s!ima!ed liabili! for res!ora!ion "os! 450,000
7ine improvemen!s ,000,000Cash ,000,000
200, Deple!ion )00,000 ' 2.)0 1,5)0,000#""umula!ed deple!ion 1,5)0,000
Depre"ia!ion )00,000 ' 4 2,400,000#""umula!ed depre"ia!ion 2,400,000
2010 Deple!ion 400,000 ' 1.)0 )40,000#""umula!ed deple!ion )40,000
Deple!able "os! 5,200,000ess> 2009 deple!ion 1,5)0,000Balan"e 3,)40,000 @ 2,265,000 K 1.)0 3,)40,000
7ine improvemen!s 660,000Cash 660,000
Depre"ia!ion 400,000 ' 2.0 1,120,000#""umula!ed depre"ia!ion 1,120,000
Cos! ,000,000 J 660,000 ,660,000ess> #""umula!ed depre"ia!ion 2,400,000Boo+ value ),360,000 @ 2,265,000 K 2.0
),360,000
23,Problem 1)-(
Deple!ion ra!e 5,000,000 @ 1,000,000 5.00Depre"ia!ion ra!e ,000,000 @ 1,000,000 .00
$ir&t %earDeple!ion 200,000 ' 5 1,000,000Depre"ia!ion 200,000 ' 1,)00,000
e#ond %earDeple!ion 250,000 ' 5 1,250,000Depre"ia!ion 250,000 ' 2,000,000
T+ird %earDeple!ion noneDepre"ia!ion %"hedule # 550,000
%"hedule # F Compu!a!ion of depre"ia!ion for !hird ear
Cos! of e-uipmen! ,000,000
8/11/2019 Financial Accounting chapter 16 - 20
http://slidepdf.com/reader/full/financial-accounting-chapter-16-20 32/70
ess> #""umula!ed depre"ia!ion 3,)00,000 Boo+ value F beginning of !hird ear
4,400,000 Divide b remaining useful life in ears 10 F 2 Depre"ia!ion for !hird ear
550,000
$ourt+ %ear
Deple!ion 100,000 ' 5 500,000Depre"ia!ion %"hedule B 600,000
%"hedule B F Compu!a!ion of depre"ia!ion for four!h ear
Cos! of e-uipmen! ,000,000 ess> #""umula!ed depre"ia!ion 4,150,000
Boo+ value F beginning of four!h ear3,50,000
Hriginal es!ima!e of resour"e deposi!s 1,000,000 !ons ess> &'!ra"!ed in *rs! and se"ond ears 450,000
Remaining ou!pu! 550,000 !ons
Depre"ia!ion ra!e per uni! 3,50,000 @ 550,000 6.00 Depre"ia!ion for !hird ear 100,000 ' 6600,000
Problem 1)-)
1. Re!ained earnings 1,500,000 #""umula!ed deple!ion 2,500,000 o!al 4,000,000 ess> Capi!al li-uida!ed 1,00,000 Deple!ion in ending inven!or 5,000 ' 20 100,000
1,900,000 7a'imum dividend 2,100,000
20
2. Re!ained earnings 1,00,000Capi!al li-uida!ed 200,000
Dividends paable 2,000,000
Problem 1)-,
1. Cash 50,000 ' 110 5,500,000%hare "api!al 50,000 ' 1005,000,000%hare premium 500,000
2. Resour"e proper! 3,000,000Cash 3,000,000
3. 7ining e-uipmen! 00,000Cash 00,000
8/11/2019 Financial Accounting chapter 16 - 20
http://slidepdf.com/reader/full/financial-accounting-chapter-16-20 33/70
4. Cash 5,000 ' 50 4,250,000%ales 4,250,000
5. 7ining and o!her dire"! "os! 2,2),000 #dminis!ra!ive e'penses 500,000
Cash 2,6),000
). Deple!ion 260,000#""umula!ed deple!ion 3,000,000 @ 1,000,000 ' 90,000
260,000
6. Depre"ia!ion 90,000 ' .0 62,000#""umula!ed depre"ia!ion 8 mining e-uipmen! 62,000
Depre"ia!ion ra!e 00,000 @ 1,000,000 K .0
. nven!or, De"ember 31 5,000 ' 29 145,000Pro*! and loss 145,000
7ining labor and o!her dire"! "os!s 2,2),000 Deple!ion 260,000 Depre"ia!ion 62,000 o!al produ"!ion "os!s in"urred 2,)10,000 Divide b number of uni!s e'!ra"!ed 90,000 ni! "os! 29
21
*ultinational Compan%9n#ome tatement
5ear ended e#ember 31: 200)
%ales 4,250,000Cos! of sales
7ining labor and o!her dire"! "os!s 2,2),000
Deple!ion 260,000Depre"ia!ion 62,000
o!al produ"!ion "os! 2,)10,000ess> nven!or, De"ember 31 145,000
2,4)5,000ross in"ome 1,65,000#dminis!ra!ive e'penses 500,000?e! in"ome 1,25,000
8/11/2019 Financial Accounting chapter 16 - 20
http://slidepdf.com/reader/full/financial-accounting-chapter-16-20 34/70
*ultinational Compan%tatement o $inan#ial Po&ition
e#ember 31: 200)
A&&et&Curren! asse!s>
Cash 3,12,000nven!or 145,000 3,326,000?on"urren! asse!s>
Resour"e proper! 3,000,000ess> #""umula!ed deple!ion 260,000 2,630,0007ining e-uipmen! 00,000ess> #""umula!ed depre"ia!ion 62,000 62,000 3,45,000
o!al asse!s ),65,000
Euit%%hare "api!al 5,000,000%hare premium 500,000Re!ained earnings 1,25,000
o!al e-ui! ),65,000
Re!ained earnings 1,25,000#dd> #""umula!ed deple!ion 260,000
o!al 1,555,000ess> nrealied deple!ion in ending inven!or 5,000 ' 315,0007a'imum dividend 1,540,000
Re!ained earnings 1,25,000Capi!al li-uida!ed 255,000
Dividends paable 1,540,000
22
Problem 1)-10
1. Pur"hase pri"e 50,000 Road "ons!ru"!ion 5,000,000 mprovemen!s and developmen! "os!s 650,000 o!al "os! 5,00,000
Residual value )00,000 Deple!able "os! 5,200,000
Deple!ion ra!e per uni! 5,200,000 @ 4,000,0001.30 Deple!ion for 200 500,000 ' 1.30 )50,000
Deple!able "os! 5,200,000 Deple!ion in 200 )50,000
8/11/2019 Financial Accounting chapter 16 - 20
http://slidepdf.com/reader/full/financial-accounting-chapter-16-20 35/70
Remaining deple!able "os! 4,550,000 Developmen! "os!s in 2009 1,300,000 o!al deple!able "os! F 1@1@2009 5,50,000
Hriginal es!ima!ed !ons 4,000,000 #ddi!ional es!ima!e 3,000,000
o!al es!ima!ed !ons 6,000,000 &'!ra"!ed in 200 500,000 Remaining !ons F 1@1@2009
),500,000
?e( deple!ion ra!e per uni! 5,50,000 @ ),500,000 .90
Deple!ion for 2009 1,000,000 ' .90 900,000
2. Cos! of buildings 2,000,000 Residual value 200,000 Depre"iable "os! 1,00,000
Depre"ia!ion ra!e per uni! 1,00,000 @ 4,000,000 .45
Depre"ia!ion for 200 500,000 ' .45 225,000
n !he absen"e of an s!a!emen! !o !he "on!rar, !he ou!pu! me!hod is used in"ompu!ing depre"ia!ion of mining e-uipmen!.
Depre"iable "os! 1,00,000Depre"ia!ion for 200 225,000Remaining depre"iable "os! 1,565,000#ddi!ional building in 2009 365,000
o!al depre"iable "os! F 1@1@2009 1,950,000
?e( depre"ia!ion ra!e per uni! 1,950,000 @ ),500,000.30
Depre"ia!ion for 2009 1,000,000 ' .30300,000
23Problem 1)-11
200) ?o deple!ion be"ause !here is no produ"!ion.
200, Pur"hase pri"e
2,000,000&s!ima!ed res!ora!ion "os!
2,000,000Developmen! "os! F 200
1,000,000Developmen! "os! F 2009
1,000,000 o!al "os!32,000,000
8/11/2019 Financial Accounting chapter 16 - 20
http://slidepdf.com/reader/full/financial-accounting-chapter-16-20 36/70
Residual value 5,000,000
Deple!able "os!26,000,000
Ra!e in 2009 26,000,000 @ 10,000,000
2.60
Deple!ion in 2009 3,000,000 ' 2.60,100,0002010 ons e'!ra"!ed in 20103,500,000
ons remaining in 12@31@20102,500,000
o!al es!ima!ed ou!pu! F 1@1@2010),000,000
?e( ra!e in 2010 26,000,000 F ,100,000@),000,0003.15
Deple!ion in 2010 3,500,000 ' 3.1511,025,000
Problem 1)-12 An&er B
#"-uisi!ion "os!2),400,000
Developmen! "os!3,)00,000&s!ima!ed res!ora!ion "os!1,00,000
o!al "os!31,00,000ess> Residual value3,000,000Deple!able "os!2,00,000
Ra!e per uni! 2,00,000 @ 1,200,00024
Deple!ion for 200 )0,000 ' 241,440,000
Problem 1)-13 An&er C
Deple!ion ra!e per uni! 9,200,000 @ 4,000,000 2.30
Problem 1)-1 An&er C
Ra!e per uni! 4),00,000 F 3,)00,000 @ 2,1)0,00020
8/11/2019 Financial Accounting chapter 16 - 20
http://slidepdf.com/reader/full/financial-accounting-chapter-16-20 37/70
Deple!ion in "os! of goods sold 240,000 ' 20 4,00,000
2
Problem 1)-1' An&er
#"-uisi!ion "os!10,000,000
ess> Residual value3,000,000Deple!able "os!6,000,000ess> #""umula!ed deple!ion F 12@31@2006
6,000,000 @ 10,000,000 K .60 ' 4,000,0002,00,000Remaining deple!able "os! F 1@1@2004,200,000?e( deple!ion ra!e 4,200,000 @ 6,500,000
.5)
Deple!ion for 200 1,500,000 ' .5)40,000
Problem 1)-16 An&er B
Deple!able "os!
33,000,000Deple!ion for 2006 33,000,000 @ 4,000,000 K .25 ' 200,000 1,)50,000Balan"e F 1@1@200
31,350,000
Produ"!ion in 200 225,000?e( es!ima!e F 12@31@2005,000,000?e( es!ima!e F 1@1@2005,225,000
Deple!ion for 200 31,350,000 @ 5,225,000 K ) ' 225,0001,350,000
Problem 1)-1(
;ue&tion 1 4 An&er A
Pur"hase pri"e14,000,000
ess> Residual value2,000,000Deple!able "os!
12,000,000
8/11/2019 Financial Accounting chapter 16 - 20
http://slidepdf.com/reader/full/financial-accounting-chapter-16-20 38/70
Deple!ion ra!e 12,000,000 @ 1,500,000 .00
Deple!ion for 200 150,000 ' 1,200,000
Produ"!ion 25,000 ' ) 150,000
;ue&tion 2 4 An&er C
Produ"!ion from <ul 1 !o De"ember 31, 200 25,000 ' )150,000 !ons#nnual produ"!ion 25,000 ' 12 300,000!ons&s!ima!ed life of mine 1,500,000 @ 300,0005 ears
%in"e !he life of !he mine is shor!er !han !he life of !he e-uipmen!, !he ou!pu! me!hod isused in "ompu!ing depre"ia!ion.
2'&-uipmen! ,000,000ess> Residual value 500,000Depre"iable "os! 6,500,000
Ra!e per uni! 6,500,000 @ 1,500,0005.00
Depre"ia!ion for 200 150,000 ' 5650,000
Problem 1)-1) An&er C
Pur"hase pri"e 9,000,000Developmen! "os!s in 2006 300,000
o!al "os! 9,300,000Residual value 1,200,000Deple!able "os! ,100,000
Ra!e in 2006 ,100,000 @ 2,000,0004.05
Deple!ion for 2006 200,000 ' 4.0510,000
Deple!able "os! ,100,000Deple!ion in 2006
10,000Balan"e6,290,000Developmen! "os!s in 200135,000
8/11/2019 Financial Accounting chapter 16 - 20
http://slidepdf.com/reader/full/financial-accounting-chapter-16-20 39/70
Deple!able "os! in 2006,425,000
Ra!e in 200 6,425,000 @ 1,)50,0004.50
Deple!ion for 200 300,000 ' 4.501,350,000
26
CHAPTER 1,
Problem 1,-1
1. C ). B2. B 6. C3. D . #4. C 9. B5. C 10. #
Problem 1,-2
1. #ppre"ia!ion 6,200,000 F 4,500,000 2,600,000
2. Boo+ value 4,500,000 F 900,0003,)00,000
3. Depre"ia!ed repla"emen! "os! 6,200,000 ' 0E 5,6)0,000
4. Revalua!ion surplus 5,6)0,000 F 3,)00,000 2,1)0,000
Problem 1,-3
8/11/2019 Financial Accounting chapter 16 - 20
http://slidepdf.com/reader/full/financial-accounting-chapter-16-20 40/70
1. #nnual depre"ia!ion on "os! 650,000 @ 5 150,000
Hriginal life 3,000,000 @ 150,000 20ears
2. &-uipmen! 1,00,000
#""umula!ed depre"ia!ion 450,000 Revalua!ion surplus 1,350,000
3. Depre"ia!ion 4,00,000 @ 20 240,000 #""umula!ed depre"ia!ion 240,000
4. Revalua!ion surplus 90,000Re!ained earnings 1,350,000 @ 15 90,000
Problem 1,-
1. #nnual depre"ia!ion on "os! 9,000,000 @ 25 3)0,000
#ge of asse! 3,)00,000 @ 3)0,000 10ears
2. 7a"hiner ),000,000 #""umula!ed depre"ia!ion 40E ' ),000,000 2,400,000 Revalua!ion surplus 3,)00,000
3. Depre"ia!ion 9,000,000 @ 15 )00,000 #""umula!ed depre"ia!ion )00,000
2(
4. Revalua!ion surplus 240,000Re!ained earnings 3,)00,000 @ 15 240,000
Problem 1,-'
Proportional approach
1. Building 3,000,000#""umula!ed depre"ia!ion 650,000Revalua!ion surplus 2,250,000
2. Depre"ia!ion ,000,000 @ 40 or ),000,000 @ 30 200,000#""umula!ed depre"ia!ion 200,000
ross repla"emen! "os! ),000,000 @ 65E ,000,000
3. Revalua!ion surplus 65,000Re!ained earnings 2,250,000 @ 30 65,000
Elimination approach
1. #""umula!ed depre"ia!ion 1,250,000Building 1,250,000
8/11/2019 Financial Accounting chapter 16 - 20
http://slidepdf.com/reader/full/financial-accounting-chapter-16-20 41/70
Building ),000,000 F 3,650,000 2,250,000Revalua!ion surplus 2,250,000
2. Depre"ia!ion ),000,000 @ 30 200,000#""umula!ed depre"ia!ion 200,000
3. Revalua!ion surplus 65,000Re!ained earnings 65,000
Problem 1,-6
1. &-uipmen! 2,600,000#""umula!ed depre"ia!ion 500,000
Revalua!ion surplus 2,200,000
2. Depre"ia!ion 6,500,000 @ 10 650,000 #""umula!ed depre"ia!ion 650,000
3. Revalua!ion surplus 2,200,000 @ 10 220,000
Re!ained earnings 220,000
4. Cash ,000,000 #""umula!ed depre"ia!ion 2,250,000 &-uipmen! 9,200,000 ain on sale of e-uipmen! 1,050,000
2)
Revalua!ion surplus 2,200,000 8 220,000 1,90,000 Re!ained earnings 1,90,000
Problem 1,-(
1. Building 10,000,000#""umula!ed depre"ia!ion 4,000,000Revalua!ion surplus ),000,000
2. Depre"ia!ion 13,000,000 @ 5 2,)00,000#""umula!ed depre"ia!ion 2,)00,000
3. Revalua!ion surplus 1,200,000Re!ained earnings ),000,000 @ 5 1,200,000
Problem 1,-)
Repla#ement Co&t #o&t
Appre#iationBuilding 3,000,000 5,000,000 2,000,000#""umula!ed depre"ia!ion )00,000 1,000,000400,000
2,400,000 4,000,000 1,)00,000
8/11/2019 Financial Accounting chapter 16 - 20
http://slidepdf.com/reader/full/financial-accounting-chapter-16-20 42/70
#""umula!ed depre"ia!ion on "os! 3,000,000 ' 20E )00,000
ife of asse! 100E @ divided b 4E25 ears
Per"en! of a""umula!ed depre"ia!ion 5 ears @ 25 20E
ross repla"emen! "os! 4,000,000 @ 0E 5,000,000
#""umula!ed depre"ia!ion on repla"emen! "os! 5,000,000 ' 20E 1,000,000
a. %hould be en!r>
Building 2,000,000#""umula!ed depre"ia!ion 400,000Revalua!ion surplus 1,)00,000
b. Corre"!ing en!r>
Building 1,000,000 Re!ained earnings 1,000,000
#""umula!ed depre"ia!ion 400,000Revalua!ion surplus 1,)00,000
". Depre"ia!ion 4,000,000 @ 20 200,000#""umula!ed depre"ia!ion 200,000
2,
d. Revalua!ion surplus 0,000Re!ained earnings 1,)00,000 @ 20 0,000
Problem 1,-,
1. #""umula!ed depre"ia!ion 00,0007a"hiner 00,000
2. Re!ained earnings 400,000Revalua!ion surplus 400,000
Problem 1,-10
Repla#ementCo&t #o&t
Appre#iationand 5,000,000 10,000,000
5,000,000
Building 25,000,000 45,000,00020,000,000#""umula!ed depre"ia!ion
8/11/2019 Financial Accounting chapter 16 - 20
http://slidepdf.com/reader/full/financial-accounting-chapter-16-20 43/70
25,000,000 ' 3@25 3,000,00045,000,000 ' 3@25 ///////// 5,400,000
2,400,000 22,000,000 39,)00,000
16,)00,000
7a"hiner 10,000,000 15,000,000 5,000,000#""umula!ed depre"ia!ion10,000,000 ' 3@5 ),000,00015,000,000 ' 3@5 ////////// 9,000,0003,000,000
4,000,000 ),000,0002,000,000
Repla#ementCo&t #o&t
Appre#iation&-uipmen! 3,000,000 4,200,000
1,200,000
#""umula!ed depre"ia!ion3,000,000 ' 3@10 900,0004,200,000 ' 3@10 ///////// 1,2)0,000 / 3)0,000
2,100,000 2,940,00040,000
a. and 5,000,000 Building 20,000,000 7a"hiner 5,000,000 &-uipmen! 1,200,000
#""umula!ed depre"ia!ion F building 2,400,000 #""umula!ed depre"ia!ion F ma"hiner 3,000,000 #""umula!ed depre"ia!ion F e-uipmen! 3)0,000
Revalua!ion surplus 25,440,000
b. Depre"ia!ion 5,220,000 #""umula!ed depre"ia!ion F building 1,00,000 #""umula!ed depre"ia!ion F ma"hiner 3,000,000 #""umula!ed depre"ia!ion F e-uipmen! 420,000
2'0 Building>
Cos! 22,000,000 @ 22 1,000,000#ppre"ia!ion 16,)00,000 @ 22 00,000 1,00,000
7a"hiner>Cos! 4,000,000 @ 2 2,000,000#ppre"ia!ion 2,000,000 @ 2 1,000,000 3,000,000
&-uipmen!>Cos! 2,100,000 @ 6 300,000#ppre"ia!ion 40,000 @ 6 120,000 420,000
o!al depre"ia!ion 5,220,000
8/11/2019 Financial Accounting chapter 16 - 20
http://slidepdf.com/reader/full/financial-accounting-chapter-16-20 44/70
". Revalua!ion surplus 1,920,000Re!ained earnings 00,000 J 1,000,000 J 120,0001,920,000
d. Proper!, plan! and e-uipmen! a! revalued amoun!s>
and 10,000,000 Building 45,000,000 7a"hiner 15,000,000 &-uipmen! 4,200,000 o!al 64,200,000 ess> #""umula!ed depre"ia!ion 20,0,000 ?e! "arring value53,320,000
he follo(ing dis"losure should be made in !he no!es !o *nan"ial s!a!emen!s>
Repla#ement Co&t #o&t
and 5,000,000 10,000,000 Building 25,000,000 45,000,000 7a"hiner 10,000,000 15,000,000 &-uipmen! 3,000,000 4,200,000 o!al 43,000,000 64,200,000 #""umula!ed depre"ia!ion 13,200,000 20,0,000 ?e! "arring value 29,00,000 53,320,000
#+edule o A##umulated epre#iation
Repla#ement Co&t #o&t
Building 4,000,000 6,200,000 7a"hiner ,000,000 12,000,000 &-uipmen! 1,200,000 1,)0,000
13,200,000 20,0,000
2'1Problem 1,-11 An&er B
Repla#ementCo&t #o&t
Appre#iationBuilding 5,000,000 ,000,000 3,000,000#""umula!ed depre"ia!ion 1,250,000 2,000,000650,000
3,650,000 ),000,0002,250,000
8/11/2019 Financial Accounting chapter 16 - 20
http://slidepdf.com/reader/full/financial-accounting-chapter-16-20 45/70
Problem 1,-12 An&er B
ound Boo/ Revaluation value value
&urplu&
and 5,000,000 2,000,0003,000,000Building 65E ' 25,000,000 1,650,000 11,250,000
6,500,0007a"hiner 50E ' 5,000,000 2,500,000 1,500,0001,000,000
11,500,000
Problem 1,-13 An&er
$air value F De"ember 31, 200 450,000?e! boo+ value F De"ember 31, 200 302,500Revalua!ion surplus 142,500
Problem 1,-1
Nues!ion 1 An&er ANues!ion 2 An&er BNues!ion 3 An&er B
Problem 1,-1'
1. # ). # 11. #2. C 6. # 12. #3. B . D 13. #4. # 9. D 14. D
5. # 10. D 15. #
Problem 1,-16
1. mpairmen! loss 900,000#""umula!ed depre"ia!ion 900,000
Cos! 4,500,000 #""umula!ed depre"ia!ion 2,100,000 Boo+ value F <anuar 1 2,400,000 Re"overable value 1,500,000 mpairmen! loss 900,000
2. Depre"ia!ion 1,500,000 @ 3 500,000#""umula!ed depre"ia!ion 500,000
2'2
3. Cos! 4,500,000 #""umula!ed depre"ia!ion 2,100,000 J 900,000 J 500,000 3,500,000
8/11/2019 Financial Accounting chapter 16 - 20
http://slidepdf.com/reader/full/financial-accounting-chapter-16-20 46/70
Boo+ value F De"ember 31 1,000,000
Problem 1,-1(
1. mpairmen! loss 1,125,000#""umula!ed depre"ia!ion 1,125,000
Cos! F <anuar 1 2,500,000 #""umula!ed depre"ia!ion 2,500,000 F 500,000 @ ' 2500,000 Boo+ value F <anuar 1 2,000,000 Re"overable value 65,000 mpairmen! loss 1,125,000
2. Depre"ia!ion 365,000#""umula!ed depre"ia!ion 65,000 F 125,000 @ 2
365,0003. Cos! 2,500,000 #""umula!ed depre"ia!ion 500,000 J 1,125,000 J 365,000 2,000,000
Boo+ value F De"ember 31 500,000
Problem 1,-1)
1. HOer pri"e 25,000,000
Cos! of disman!ling and removal assumed b !he bidder 5,000,000 $air value less "os! !o sell 30,000,000
Presen! value of fu!ure "ash o(s33,000,000 ess> &s!ima!ed liabili! 5,000,000 Malue in use 2,000,000
Carring amoun! 39,000,000 ess> &s!ima!ed liabili! 5,000,000 #d;us!ed "arring amoun! 34,000,000 Re"overable amoun! F fair value less "os! !o sell, being !he higher amoun!30,000,000 mpairmen! loss 4,000,000
P#% 3), paragraph 6, provides !ha! !he fair value less "os! !o sell is e-ual !o !hees!ima!ed selling pri"e plus !he es!ima!ed liabili! assumed b !he buer.
he s!andard fur!her provides !ha! !o perform a meaningful "omparison be!(een !he"arring amoun! and re"overable amoun!, !he es!ima!ed liabili! assumed b !he buer
is dedu"!ed in de!ermining bo!h !he value in use and "arring amoun! of !he asse!.
2. mpairmen! loss 4,000,000#""umula!ed depre"ia!ion 4,000,000
2'3
Problem 1,-1,
8/11/2019 Financial Accounting chapter 16 - 20
http://slidepdf.com/reader/full/financial-accounting-chapter-16-20 47/70
1. <et #a&+ in=o& P> a#tor Pre&ent value200 1,000,000 .930
1),640,0002009 15,000,000 .56
12,55,000
2010 15,000,000 .69411,910,0002011 12,000,000 .635
,20,000 )0,000,000
o!al value in use 50,325,000
2. he re"overable amoun! is !he value in use of P50,325,000 be"ause !his is higher !han!he
fair value less "os! !o sell of P4,000,000.
3. mpairmen! loss 14,)65,000#""umula!ed depre"ia!ion )5,000,000 F 50,325,000 14,)65,000
4. Depre"ia!ion 12,51,250#""umula!ed depre"ia!ion 50,325,000 @ 4
12,51,250
Problem 1,-20
1. Depre"ia!ion 1,000,000#""umula!ed depre"ia!ion 10,000,000 @ 10 1,000,000
2. Depre"ia!ion 1,000,000#""umula!ed depre"ia!ion 1,000,000
3. mpairmen! loss 2,000,000#""umula!ed depre"ia!ion 2,000,000
4. Depre"ia!ion 650,000#""umula!ed depre"ia!ion ),000,000 @ 650,000
5. #""umula!ed depre"ia!ion 1,650,000ain on impairmen! re"over 1,650,000
Cos! F 1@1@200) 10,000,000#""umula!ed depre"ia!ion 10,000,000 @ 10 ' 2 2,000,000Boo+ value F 12@31@2006 ,000,000mpairmen! loss F 2006 2,000,000
#d;us!ed boo+ value F 12@31@2006 ),000,000Depre"ia!ion F 200 ),000,000 @ 650,000Boo+ value F 12@31@200 5,250,000
Cos! F 1@1@200) 10,000,000#""umula!ed depre"ia!ion 10,000,000 @ 10 ' 3 3,000,000Boo+ value F 12@31@200 assuming no impairmen!
6,000,000Re"orded boo+ value 5,250,000
8/11/2019 Financial Accounting chapter 16 - 20
http://slidepdf.com/reader/full/financial-accounting-chapter-16-20 48/70
ain on reversal of impairmen! 1,650,000
2'
he fair value or re"overable value of P6,500,000 "anno! e'"eed !he boo+ value !ha!
(ould have been de!ermined assuming no impairmen! is re"ognied.
Problem 1,-21
1. mpairmen! loss 5,000,000#""umula!ed depre"ia!ion 35,000,000 F 30,000,000 5,000,000
2. Depre"ia!ion ),000,000#""umula!ed depre"ia!ion 30,000,000 @ 5),000,000
Hbserve !ha! !he undis"oun!ed ne! "ash o(s from !he asse! amoun! !o P36,500,000for 5 ears. his amoun! is more !han !he boo+ value of !he ma"hiner. nder
#meri"an%!andard, no impairmen! loss should be re"ognied in !his "ase. Io(ever, under !heP#% 3), if !he re"overable amoun! is less !han "arring amoun!, an impairmen! loss is
re"ognied, regardless of !he amoun! of undis"oun!ed "ash o(s (he!her less !han ormore !han !he "arring amoun!. P#% 3) has !o!all re;e"!ed !he "on"ep! ofundis"oun!ed "ash o(s for impairmen! purposes.
Problem 1,-22
1. Malue in use 1,500,000 ' 5.)5 ,465,000
2. mpairmen! loss ,250,000#""mula!ed depre"ia!ion ,250,000
Buildings 25,000,000 #""umula!ed depre"ia!ion 22,500,000 @ 20 ' )),650,000 Boo+ value F 1@1@200 1,250,000 $air value F +ig+er t+an value in u&e 10,000,000 mpairmen! loss ,250,000
3. Depre"ia!ion 1,000,000#""umula!ed depre"ia!ion 10,000,000 @ 10 1,000,000
Problem 1,-23
1. Malue in use 00,000 ' 3.99 3,192,000
2. mpairmen! loss 30,000#""umula!ed depre"ia!ion 30,000
7a"hiner 5,000,000 #""umula!ed depre"ia!ion 1,500,000 Boo+ value F 1@1@200 3,500,000 Presen! value of "ash o(s F +ig+er t+an air value 3,192,000
8/11/2019 Financial Accounting chapter 16 - 20
http://slidepdf.com/reader/full/financial-accounting-chapter-16-20 49/70
mpairmen! loss 30,000
3. Depre"ia!ion )3,400#""umula!ed depre"ia!ion 3,192,000 @ 5 )3,400
2''
Problem 1,-2
1. o!al "arring amoun! 5,000,000 Malue in use 3,)00,000 mpairmen! loss 1,400,000
2. mpairmen! loss allo"a!ed !o good(ill 500,000 mpairmen! loss allo"a!ed !o !he o!her asse!s 900,000
1,400,000
Ghen an impairmen! loss is re"ognied for a "ash genera!ing uni!, !he loss is allo"a!ed !o !he asse!s of !he uni! in !he follo(ing order>
a. $irs!, !o !he goodill, if an.b. hen, !o all o!her asse!s of !he uni! prorata based on !heir "arring amoun!.
Carr%ing amount $ra#tion Lo&&
Building 2,000,000 20@45 400,000 nven!or 1,500,000 15@45 300,000
rademar+ 1,000,000 10@45 200,000 4,500,000 900,000
3. mpairmen! loss 1,400,000ood(ill 500,000#""umula!ed depre"ia!ion F building 400,000nven!or 300,000
rademar+ 200,000
Problem 1,-2'
1. Carring amoun! 1),000,000 Malue in use 11,000,000 mpairmen! loss 5,000,000
2. Allo#ation o impairment lo&&
Building @1) ' 5,000,000
2,500,000 &-uipmen! 4@1) ' 5,000,000 1,250,000 nven!or 4@1) ' 5,000,000 1,250,000
5,000,000
Hbserve !ha! af!er allo"a!ing !he P2,500,000 loss !o !he building, !he "arring amoun!of !he building (ould be P5,500,000 (hi"h is loer t+an i!s fair value of P),500,000.
8/11/2019 Financial Accounting chapter 16 - 20
http://slidepdf.com/reader/full/financial-accounting-chapter-16-20 50/70
#""ordingl, onl P1,500,000 loss is allo"a!ed !o !he building and !he balan"e of P1,000,000 is reallo"a!ed !o !he e-uipmen! and inven!or prora!a.
2'6
Building Euipment 9nventor%#llo"a!ed loss 2,500,000 1,250,000 1,250,000Reallo"a!ed loss 1,000,000 4@ ' 1,000,000 500,000 4@ ' 1,000,000 ///////// ///////// 500,000mpairmen! loss 1,500,000 1,650,000 1,650,000
3. mpairmen! loss 5,000,000#""umula!ed depre"ia!ion F building 1,500,000
#""umula!ed depre"ia!ion F e-uipmen! 1,650,000nven!or 1,650,000
Problem 1,-26
#ll nimar!:s s!ores are in diOeren! lo"a!ions and probabl have diOeren! "us!omerpro*le. %o al!hough %mar! is managed a! !he "orpora!e level, %mar! genera!es "ashino(s !ha! are largely independent from !hose of !he o!her nimar!:s s!ores. herefore,i! is li+el !ha! %mar! in i!self is a "ash genera!ing uni!.
Problem 1,-2(
! is li+el !ha! !he re"overable amoun! of an individual magaine !i!le "an be assessed.&ven !hough !he level of adver!ising in"ome for a !i!le is inuen"ed !o a "er!ain e'!en! b!he o!her !i!les in !he "us!omer segmen!, "ash ino(s from dire"! sales and adver!isingare identiable for ea"h !i!le. n addi!ion, de"isions !o abandon !i!les are made on anindividual basis.
#""ordingl, !he individual magaine !i!les genera!e "ash ino(s !ha! are largely independent from one ano!her and !herefore, each magazine title is a separa!e "ashgenera!ing uni!.
Problem 1,-2)
Case 1
1. # is separa!e "ash genera!ing uni! be"ause !here is an a"!ive mar+e! for #:s produ"!s.
2. #l!hough !here is an a"!ive mar+e! for !he produ"!s of B and C, "ash ino(s from Band
C depend on !he allo"a!ion of produ"!ion a"ross !(o "oun!ries. ! is unlikely !ha! "ash ino(s from B and C "an be de!ermined individually . herefore, B and C, !oge!her
8/11/2019 Financial Accounting chapter 16 - 20
http://slidepdf.com/reader/full/financial-accounting-chapter-16-20 51/70
should be !rea!ed as a "ash genera!ing uni!.
257
Case 2
a. # "anno! be !rea!ed as a separa!e "ash genera!ing uni! be"ause i!s "ash ino(sdepend on !he sales of !he *nal produ"! b B and C, sin"e !here is no a"!ive mar+e!for #:s produ"!.
b. #s a "onse-uen"e, #, B and C, !oge!her, and !herefore, 7a'imus Compan, as a
(hole, should be !rea!ed as !he larges! single "ash genera!ing uni!.
Problem 1,-2,
he primar purpose of !he building is !o serve as a corporate asset suppor!ing i!musCompan:s manufa"!uring opera!ions. herefore, !he building in i!self "anno! be"onsidered !o genera!e "ash ino(s !ha! are largel independen! of !he "ash ino(sfrom !he en!i! as a (hole. n !his "ase, !he "ash genera!ing uni! is i!mus Compan as a(hole.
he building is not held for inves!men!. hus, i! is no! appropria!e !o de!ermine !hevalue in use of !he building based on !he "ash ino(s of rela!ed ren!.
Problem 1,-30 An&er C
Cos!, <anuar 1, 200500,000#""umula!ed depre"ia!ion, De"ember 31, 2006 100,000 ' 3 300,000Boo+ value, De"ember 31, 2006 500,000Re"overable value 200,000mpairmen! loss 300,000
he loss is re"orded as follo(s>
mpairmen! loss 300,000#""umula!ed depre"ia!ion 300,000
Cos! 00,000#""umula!ed depre"ia!ion 300,000 J 300,000 )00,000Re"overable value, <anuar 1, 200200,000Depre"ia!ion for 200 200,000 @ 5 40,000Boo+ value, De"ember 31, 200 1)0,000
8/11/2019 Financial Accounting chapter 16 - 20
http://slidepdf.com/reader/full/financial-accounting-chapter-16-20 52/70
Problem 1,-31 An&er B
$rom #ugus! 31, 2005 !o 7a 31, 200 is a period of 33 mon!hs. hus, !he remaining lifeof !he ma"hine is 26 mon!hs, )0 mon!hs original life minus 33.
Depre"ia!ion for !he mon!h of <une 200 1,350,000 @ 26 mon!hs50,000
2')
Cos! 3,200,000#""umula!ed depre"ia!ion F 5@31@200 3,200,000 F 500,000 ' 33@)0 1,45,000Boo+ value F 5@31@200 1,615,000$air value 1,350,000mpairmen! loss 3)5,000
Problem 1,-32 An&er B
Cos! F <anuar 1, 2004 1,000,000#""umula!ed depre"ia!ion, De"ember 31, 2006 900,000 @ 10 ' 43)0,000Boo+ value, De"ember 31, 2006 )40,000Depre"ia!ion for 200 )40,000 F 40,000 @ 4150,000Boo+ value, De"ember 31, 200 490,000
Problem 1,-33 An&er C
Boo+ value, 1@1@2002,400,000
Depre"ia!ion for 200 1,)00,000 @ 4400,000Boo+ value, 12@31@200 2,000,000%ales pri"e8re"overable value )50,000mpairmen! loss 1,350,000
Problem 1,-3 An&er C
Depre"ia!ion for 200 10E ' 2,000,000 200,000
Cos! F 1@2@2004 2,000,000#""umula!ed depre"ia!ion 8 12@31@0 200,000 ' 5 1,000,000
Boo+ value812@31@200 1,000,000&s!ima!ed "os! of disposal 50,000mpairmen! loss 1,050,000
Problem 1,-3' An&er C
8/11/2019 Financial Accounting chapter 16 - 20
http://slidepdf.com/reader/full/financial-accounting-chapter-16-20 53/70
Cos! 2,000,000#""umula!ed depre"ia!ion F 1@1@200 2,000,000 F 100,000 @ 10 ' 2.5 465,000Boo+ value F 1@1@200 1,525,000$air value )00,000mpairmen! loss 925,000
Problem 1,-36 An&er C
Cos! F 12@31@20042,00,000#""umula!ed depre"ia!ion F @31@200 2,400,000 @ 9) mon!hs ' 441,100,000Boo+ value F @31@2001,600,000$air value1,500,000 mpairmen! loss200,000
2',
Problem 1,-3( An&er C
Carring value2,000,000
De"ommissioning "os! ,000,000#d;us!ed "arring value
20,000,000$air value less "os! !o sell F higher 20,000,000 less 1,000,000
19,000,000mpairmen! loss1,000,000
Malue in use2),000,000
De"ommissioning "os! ,000,000#d;us!ed value in use
1,000,000
Problem 1,-3) An&er C
Carring value F 12@31@2006 6,000,000Depre"ia!ion for 200 20E
1,400,000Carring value F 12@31@200 5,)00,000Carring value F 12@31@200 assuming no impairmen! 6,200,000Reversal of impairmen! loss 1,)00,000
8/11/2019 Financial Accounting chapter 16 - 20
http://slidepdf.com/reader/full/financial-accounting-chapter-16-20 54/70
260CHAPTER 20
Problem 20-1 Problem 20-2
1. D ). D 1. # ). B
2. C 6. # 2. # 6. B3. D . D 3. C . D4. # 9. D 4. D 9. D5. D 10. B 5. D 10. D
Problem 20-3
200) <an. 1 Pa!en! 255,000
Cash 255,000
De". 31 #mor!ia!ion of pa!en! 12,650 Pa!en! 255,000 @ 20 12,650
200,De". 31 #mor!ia!ion of pa!en! 12,650
Pa!en! 12,650
2010 <an. 5 egal e'pense 90,000
Cash 90,000
8/11/2019 Financial Accounting chapter 16 - 20
http://slidepdf.com/reader/full/financial-accounting-chapter-16-20 55/70
De". 31 #mor!ia!ion of pa!en! 12,650 Pa!en! 12,650
2011 <an. 1 Pa!en! 510,000
Cash 510,000
De". 31 #mor!ia!ion of pa!en! 42,650Pa!en! 42,650
Hn original "os! 12,650 Hn "ompe!ing pa!en! 510,000 @ 16 30,000
42,650
Problem 20-
200) Resear"h and developmen! e'pense 510,000Cash 510,000
2011 Pa!en! 620,000Cash 620,000
261
#mor!ia!ion of pa!en! 620,000 @ 1) 45,000Pa!en! 45,000
2012 Pa!en! 540,000 Cash 540,000
#mor!ia!ion of pa!en! 1,000 Pa!en! 1,000
Hn rela!ed pa!en! 45,000Hn "ompe!ing pa!en! 540,000 @ 15
3),000 1,000
Problem 20-'
200) Resear"h and developmen! e'pense 250,000Cash 250,000
200, Pa!en! )0,000
Cash )0,000
#mor!ia!ion of pa!en! ),000Pa!en! )0,000 @ 10 ),000
2010 Pa!en! )00,000 Cash )00,000
8/11/2019 Financial Accounting chapter 16 - 20
http://slidepdf.com/reader/full/financial-accounting-chapter-16-20 56/70
Hriginal "os! )0,000?e( pa!en! )00,000
o!al "os! ))0,000ess> #mor!ia!ion for 200 ),000Balan"e F <anuar 1, 2009 )54,000
#mor!ia!ion of pa!en! )54,000 @ 15 43,)00 Pa!en! 43,)00
2011 #mor!ia!ion of pa!en! 43,)00 Pa!en! 43,)00
Pa!en! (ri!!en oO 5)),00
Pa!en! 5)),00
Balan"e F 1@1@2010 )54,000ess> #mor!ia!ion
2010 43,)00
2011 43,)00 6,200namor!ied "os! 5)),00
262
Problem 20-6
1. Pa!en! 6,140,000Cash 6,140,000
2. #mor!ia!ion of pa!en! 46),000Pa!en! 6,140,000 @ 15 46),000
3. #mor!ia!ion of pa!en! 1),000Pa!en! 5,612,000 @ 6
1),000
4. #"-uisi!ion "os! 6,140,000 #mor!ia!ion for 2005, 200) and 2006 46),000 ' 3 1,42,000 Carring amoun! F 1@1@200 5,612,000 #mor!ia!ion for 200 1),000 Carring amoun! F 12@31@200 4,9),000
Problem 20-(
1. Pa!en! 900,000Cash 900,000
2. #mor!ia!ion of pa!en! 90,000Pa!en! 900,000 @ 10 90,000
8/11/2019 Financial Accounting chapter 16 - 20
http://slidepdf.com/reader/full/financial-accounting-chapter-16-20 57/70
3. Pa!en! (ri!!en oO 540,000Pa!en! 540,000
Cos! 900,000 #mor!ia!ion for 2005, 200), 2006 and 200 90,000 ' 43)0,000
Carring amoun! F 12@31@200 540,000
Problem 20-)
1. Pa!en! ),200,000Cash ),200,000
2. egal e'penses 450,000Cash 450,000
3. #mor!ia!ion of pa!en! 1,050,000Pa!en! 1,050,000
Q 1,200,000 @ 150,000 L 2,000,000 @ 5 400,000 3,000,000 @ ) 500,000
1,050,000
263Problem 20-,
1. Re!ained earnings 500,000Pa!en! 500,000
2. Pa!en! 510,000 Re!ained earnings 510,000
3. ?o ad;us!men!.
4. oss on damages 100,000 egal e'pense 30,000
#""rued liabili!ies 130,000
5. Pa!en! 24,500Re!ained earnings 24,500
#mor!ia!ion per boo+ 500,000 F 450,000 50,000
Corre"! amor!ia!ion for 2006 510,000 @ 20 25,500 Hveramor!ia!ion 24,500
). #mor!ia!ion of pa!en! 25,500Pa!en! 25,500
Problem 20-10
200) Coprigh! 25,000Cash 25,000
8/11/2019 Financial Accounting chapter 16 - 20
http://slidepdf.com/reader/full/financial-accounting-chapter-16-20 58/70
#mor!ia!ion of "oprigh! 150,000 Coprigh! 150,000
25,000 @ 95,000 K 3 per "op50,000 ' 3 K 150,000
200, #mor!ia!ion of "oprigh! 90,000Coprigh! 30,000 ' 3
90,000
Problem 20-11
1. Coprigh! 240,000Re!ained earnings 240,000
Cos! of "oprigh! 300,000 ess> #mor!ia!ion 300,000 @ 5 )0,000 Boo+ value 240,000
2. #mor!ia!ion of "oprigh! )0,000Coprigh! )0,000
26Problem 20-12
1. Coprigh! )20,000 Pa!en! 400,000
Re!ained earnings 1,020,000
Coprigh! 1 400,000
ess> #mor!ia!ion from 1@1@2004 !o 12@31@2006 400,000 @ 20 ' 40,000 Boo+ value 320,000
Coprigh! 2 3)0,000 ess> #mor!ia!ion from 6@1@2005 !o 12@31@2006 3)0,000 @ 15 ' 2.5 )0,000 Boo+ value 300,000
Pa!en! 500,000 ess> #mor!ia!ion for 200) and 2006 500,000 @ 10 ' 2100,000 Boo+ value 400,000
2. #mor!ia!ion of "oprigh! 20,000 J 24,000 44,000 #mor!ia!ion of pa!en! 50,000
Coprigh! 44,000Pa!en! 50,000
Problem 20-13
Boo/& o $ran#+i&ee
8/11/2019 Financial Accounting chapter 16 - 20
http://slidepdf.com/reader/full/financial-accounting-chapter-16-20 59/70
1. $ran"hise ),000,000Cash ),000,000
2. #mor!ia!ion of fran"hise 300,000$ran"hise ),000,000 @ 20 300,000
3. Cash 25,000,000%ales 25,000,000
4. $ran"hise fee e'pense 1,250,000Cash 25,000,000 ' 5E 1,250,000
Problem 20-1
Boo/& o $ran#+i&ee
1. $ran"hise 20,000,000Cash 5,000,000?o!e paable 15,000,000
2. ?o!e paable 15,000,000 @ 4 3,650,000 n!eres! e'pense 15,000,000 ' 10E 1,500,000
Cash 5,250,000
26'
3. here is no amor!ia!ion be"ause !he fran"hise is for an inde*ni!e period.
Problem 20-1'
Boo/& o $ran#+i&ee
1. $ran"hise 3,000,000 J 3,690,000 ),690,000 Dis"oun! on no!e paable 1,210,000
Cash 3,000,000?o!e paable 5,000,000
?o!e paable 5,000,000 Presen! value of no!e 1,000,000 ' 3.69
3,690,000 mplied in!eres! 1,210,000
2. #mor!ia!ion of fran"hise )69,000$ran"hise ),690,000 @ 10 )69,000
3. ?o!e paable 1,000,000Cash 1,000,000
4. n!eres! e'pense 10E ' 3,690,000 369,000Dis"oun! on no!e paable 369,000
Problem 20-16
8/11/2019 Financial Accounting chapter 16 - 20
http://slidepdf.com/reader/full/financial-accounting-chapter-16-20 60/70
Reuirement a
1. easehold improvemen! F building 5,000,000Cash 5,000,000
2. Ren! e'pense 50,000 ' 12 )00,000
Cash )00,000
3. Depre"ia!ion 5,000,000 @ 10 500,000#""umula!ed depre"ia!ion 500,000
Reuirement b
#""umula!ed depre"ia!ion 2,500,000oss on leasehold "an"ela!ion 2,500,000
easehold improvemen! F building 5,000,000
Problem 20-1(
1. Ren! e'pense 1,200,000 Prepaid ren! 1,200,000Cash 2,400,000
266
2. easehold 2,000,000Cash 2,000,000
3. easehold improvemen! 500,000Cash 500,000
4. #mor!ia!ion of leasehold 400,000easehold 2,000,000 @ 5 400,000
5. Depre"ia!ion 500,000 @ 5 100,000#""umula!ed depre"ia!ion 100,000
Problem 20-1)
1. easehold 1,000,000Cash 1,000,000
2. Ren! e'pense 150,000 ' 12 1,00,000
Cash 1,00,000
3. easehold improvemen! 400,000Cash 400,000
4. easehold improvemen! 100,000
Cash 100,000
5. #mor!ia!ion of leasehold 100,000
8/11/2019 Financial Accounting chapter 16 - 20
http://slidepdf.com/reader/full/financial-accounting-chapter-16-20 61/70
easehold 1,000,000 @ 10 100,000
). Depre"ia!ion )0,000#""umula!ed depre"ia!ion )0,000
400,000 @ 10
40,000 100,000 @ 5 20,000 )0,000
Problem 20-1,
1. Ren! e'pense )00,000Cash )00,000
2. easehold 100,000Cash 100,000
3. easehold improvemen! 200,000
Cash 200,000
4. easehold improvemen! 50,000Cash 50,000
26(
5. #mor!ia!ion of leasehold 20,000easehold 100,000 @ 5 20,000
). Depre"ia!ion 52,500#""umula!ed depre"ia!ion 52,500
200,000 @ 5 40,000 50,000 @ 4 12,500
52,500
Problem 20-20
1. #mor!ia!ion of pa!en! 20,000#""umula!ed amor!ia!ion 1,920,000 F 240,000 @ ) 20,000
2. rademar+ 00,000 ' 3@4 )00,000 ?on"ompe!i!ion agreemen! 200,000
Cash 00,000
3. #mor!ia!ion of non"ompe!i!ion agreemen! 40,000#""umula!ed amor!ia!ion 200,000 @ 5 40,000
4. Roal! e'pense 50,000Cash 50,000
Problem 20-21
8/11/2019 Financial Accounting chapter 16 - 20
http://slidepdf.com/reader/full/financial-accounting-chapter-16-20 62/70
1. #"-uisi!ion "os! 6,500,000 ?e! asse!s a"-uired 4,)00,000 ood(ill 2,900,000
2. Cash 50,000 #""oun!s re"eivable 00,000
nven!or 1,350,000 Proper!, plan! and e-uipmen! 4,300,000 ood(ill 2,900,000
#""oun!s paable 900,000?o!e paable F ban+ 1,000,000Cash 6,500,000
Problem 20-22
1. #"-uisi!ion "os! ),000,000 ?e! asse!s a"-uired a! fair value 3,300,000 ood(ill 2,600,000
o!al asse!s a! fair value 5,300,000 o!al liabili!ies 2,000,000 ?e! asse!s a"-uired a! fair value 3,300,000
26)
2. Cash 50,000 #""oun!s re"eivable 500,000 nven!or 1,500,000 Pa!en! 250,000 Proper!, plan! and e-uipmen! 3,000,000 ood(ill 2,600,000
#""oun!s paable 2,000,000
Cash ),000,000
Problem 20-23
1. Cash 1,000,000 nven!or 500,000 n8pro"ess R and D 5,000,000 o!al asse!s ),500,000 o!al liabili!ies 3,000,000 ?e! asse!s 3,500,000
#"-uisi!ion "os! ,000,000 ?e! asse!s a"-uired a! fair value 3,500,000
ood(ill 4,500,000
he good(ill in"ludes !he fair value of !he assembled (or+for"e of P1,200,000. he assembled (or+for"e is no! a""oun!ed for separa!el as an asse!.
2. Cash 1,000,000 nven!or 500,000 n pro"ess R and D 5,000,000 ood(ill 4,500,000
8/11/2019 Financial Accounting chapter 16 - 20
http://slidepdf.com/reader/full/financial-accounting-chapter-16-20 63/70
#""oun!s paable 2,)00,000?o!es paable 400,000Cash ,000,000
Problem 20-2
1. #verage earnings 250,000 Divide b 10E?e! asse!s in"luding good(ill 2,500,000
ess> ?e! asse!s before good(ill 1,600,000 ood(ill 00,000
2. #verage earnings 250,000 ess> ?ormal earnings E ' 1,600,00013),000 &'"ess earnings 114,000 Divide b 15E ood(ill 6)0,000
26,
3. #verage earnings 250,000 ess> ?ormal earnings 10E ' 1,600,000160,000 &'"ess earnings 0,000 7ul!ipl b 5 ood(ill 400,000
4. &'"ess earnings 0,0007ul!ipl b 5.)5
ood(ill 452,000
Problem 20-2'
#verage earnings or prior ears 1,500,000 @ 3 500,000n"rease in average earnings 10E ' 500,000 50,000
o!al 550,000ess> Pa!en! amor!ia!ion 500,000 @ 5 ears100,000&arnings for good(ill "ompu!a!ion 450,000
a. #verage fu!ure earnings 450,000 Divide b E ?e! asse!s in"luding good(ill 5,)25,000 ess> ?e! asse!s e'"luding good(ill 5,000,000 ood(ill )25,000
b. #verage earnings 450,000 ess> ?ormal earnings E ' 5,000,000 400,000 #verage e'"ess earnings 50,000
8/11/2019 Financial Accounting chapter 16 - 20
http://slidepdf.com/reader/full/financial-accounting-chapter-16-20 64/70
Divide b 10E ood(ill 500,000 ". ood(ill 50,000 ' 3.16 15,500
Problem 20-26
a. #verage earnings 650,000 &'pe"!ed in"rease 1,000,000 F 900,000100,000 o!al 50,000 ess> ?ormal earnings 4,00,000 ' 10E40,000 &'"ess earnings 360,000
ood(ill 360,000 ' 4 1,40,000
%hareholders: e-ui! per boo+ 5,000,000 ess> Re"orded good(ill 200,000
?e! asse!s before good(ill 4,00,000
b. ood(ill 360,000 @ 20E 1,50,000
2(0
Problem 20-2(
1. %hare "api!al 2,000,000 Re!ained earnings 1,500,000 o!al shareholders: e-ui!
3,500,000 ess> Re"orded good(ill 1,000,000 ?e! asse!s before good(ill 2,500,000
#verage earnings 1,200,000 J 150,000 @ 3 450,000 ess> ?ormal earnings 10E ' 2,500,000250,000 &'"ess earnings 200,000 Divide b 1)E ood(ill 1,250,000
2. ?e! asse!s before good(ill 2,500,000 ood(ill 1,250,000
Pur"hase pri"e 3,650,000
Problem 20-2)
1. Malue in use 3,000,000 ?e! asse!s in"luding good(ill a! "arring amoun! 42,000,000 mpairmen! loss 4,000,000
8/11/2019 Financial Accounting chapter 16 - 20
http://slidepdf.com/reader/full/financial-accounting-chapter-16-20 65/70
2. mpairmen! loss 4,000,000ood(ill 4,000,000
Problem 20-2,
1. Malue in use )0,000,000
?e! asse!s in"luding good(ill a! "arring amoun! 65,000,000 mpairmen! loss15,000,000
2. mpairmen! loss 15,000,000ood(ill 5,000,000#""oun!s re"eivable 2,000,000nven!or 3,000,000#""umula!ed depre"ia!ion 5,000,000
he remaining impairmen! loss of P10,000,000, af!er dedu"!ing !he lossappli"able !o good(ill, is allo"a!ed !o !he o!her non"ash asse!s on aprora!a basis.
Problem 20-30
1. Presen! value of inde*ni!e "ash o(s 200,000 @ 10E2,000,000
rademar+ ),000,000 mpairmen! loss 4,000,000
2(1
Presen! value of "ash o(s from "ash genera!ing uni! 9,000,000 ' .51
6),590,000 ?e! asse!s in"luding good(ill a! "arring amoun! 0,000,000 mpairmen! loss 3,410,000
2. mpairmen! loss 6,410,000 rademar+ 4,000,000ood(ill 3,410,000
Problem 20-31
1. o!al "arring amoun! 5,000,000 Malue in use 4,230,000 mpairmen! loss 660,000
2. mpairmen! loss 660,000ood(ill 500,000#""umula!ed depre"ia!ion F building 25@45 ' 260,000 150,000nven!or 15@45 ' 260,000 90,000
rademar+ 5@45 ' 260,000 30,000
Problem 20-32
8/11/2019 Financial Accounting chapter 16 - 20
http://slidepdf.com/reader/full/financial-accounting-chapter-16-20 66/70
12@31@200 R and D e'pense 2,500,000Cash 2,500,000
1@1@2009 R and D e'pense 1,200,000Cash 1,200,000
6@1@2009 R and D e'pense 500,000Cash 500,000
11@1@2009 Pa!en! 350,000Cash 350,000
11@15@2009 Pa!en! 00,000Cash 00,000
12@31@2009 Pa!en! 100,000Cash 100,000
Problem 20-33
1. Produ"! "os!s (hi"h are asso"ia!ed (i! inven!or i!ems are>
Dupli"a!ion of "ompu!er sof!(are and !raining ma!erials 2,500,000 Pa"+aging produ"! 900,000 o!al inven!or 3,400,000
2. he "os!s in"urred from !he !ime of !e"hnologi"al feasibili! !o !he !ime (henprodu"! "os!s are in"urred should be capitalized as "ompu!er sof!(are "os!.
2(2
H!her "oding "os!s af!er es!ablishmen! of !e"hnologi"al feasibili! 2,400,000H!her !es!ing "os!s af!er es!ablishmen! of !e"hnologi"al feasibili! 2,000,000
Cos!s of produ"ing produ"! mas!ers for !raining ma!erials 1,500,000 o!al "os!s !o be "api!alied 5,900,000
3. Comple!ion of de!ail program design 1,300,000 Cos! in"urred for "oding and !es!ing !o es!ablish !e"hnologi"al feasibili! 1,000,000 o!al "os!s "harged as e'pense 2,300,000
Problem 20-3
1. Designing and planning 1,000,000 Code developmen! 1,500,000 es!ing //500,000
o!al R and D e'pense in 200 3,000,000
he "os! of produ"ing !he produ"! mas!er of P2,500,000 is "api!alied assof!(are "os! !o be subse-uen!l amor!ied.
2. Cos! of produ"ing !he sof!(are program in 2009 1,000,000 #mor!ia!ion of sof!(are "os! 2,500,000 @ 4 )25,000 o!al e'pense in 2009 1,)25,000
8/11/2019 Financial Accounting chapter 16 - 20
http://slidepdf.com/reader/full/financial-accounting-chapter-16-20 67/70
Problem 20-3' An&er C
Cos! 356,000#""umula!ed amor!ia!ion from 2005 !o 2006 356,000 @ 15 ' 361,400
Boo+ value F 12@31@2006 25,)00#mor!ia!ion for 200 25,)00 @ 6 40,00Boo+ value F 12@31@200 244,00
Problem 20-36 An&er C
Cos! 1@1@2003 ),000,000#""umula!ed depre"ia!ion F 12@31@2006 ),000,000 @ 15 ' 5 2,000,000Boo+ value F 1@1@200 4,000,000
#mor!ia!ion for 200 4,000,000 @ 500,000
Problem 20-3( An&er C
Cumula!ive earnings 550,000ess> ain on sale 50,000#d;us!ed "umula!ive earnings 500,000
2(3
#verage earnings 500,000 @ 5 100,000Divide b "api!alia!ion ra!e 10E?e! asse!s in"luding good(ill
1,000,000ess> ?e! asse!s before good(ill 650,000ood(ill 250,000
Problem 20-3) An&er C
?e! asse!s 1,00,0007ul!ipl b e'"ess ra!e 1)E minus 10E )E&'"ess earnings 10,0007ul!ipl b presen! value fa"!or 3.26ood(ill 353,1)0
Problem 20-3, An&er
Pur"hase pri"e 5,000,000ess> ood(ill500,000?e! asse!s before good(ill 4,500,000
8/11/2019 Financial Accounting chapter 16 - 20
http://slidepdf.com/reader/full/financial-accounting-chapter-16-20 68/70
&s!ima!ed annual earnings s-ueee 550,000ess> ?ormal earnings 4,500,000 ' 10E 450,000&'"ess or superior earnings 100,000Divide b "api!alia!ion ra!e 20Eood(ill 500,000
Problem 20-0 An&er C
#""oun!s re"eivable 2,000,000nven!or 500,000&-uipmen! 500,000%hor!8!erm paable 2,000,000?e! asse!s a! fair value 1,000,000
#"-uisi!ion "os! 5,000,000?e! asse!s a! fair value 1,000,000ood(ill 4,000,000
Problem 20-1 An&er A
Problem 20-2 An&er C
Do(npamen! 2,000,000Presen! value of annual pamen! for 4 ears 1,000,000 ' 2.91 2,910,000Cos! of fran"hise 4,910,000
2(
Problem 20-3 An&er A
Design "os!s 1,500,000egal fees of regis!ering !rademar+ 150,000Regis!ra!ion fee (i!h Pa!en! HA"e 50,000
o!al "os! of !rademar+ 1,600,000
Problem 20- An&er B
Hriginal lease 12 ears&'!ension
o!al life 20ess> Lears e'pired 200) and 2006 2
Remaining life 1ears
ife of improvemen! shor!er 15ears
easehold improvemen! 540,000ess> Depre"ia!ion for 200 540,000 @ 15 3),000Boo+ value 504,000
8/11/2019 Financial Accounting chapter 16 - 20
http://slidepdf.com/reader/full/financial-accounting-chapter-16-20 69/70
Problem 20-' An&er
Depre"ia!ion 3,)00,000 @ ) )00,000
Problem 20-6 An&er C
Depre"ia!ion of e-uipmen! 135,0007a!erials used 200,000Compensa!ion "os!s of personnel 500,000Hu!side "onsul!ing fees 150,000ndire"! "os!s allo"a!ed 250,000
1,235,000
Problem 20-( An&er A
7odi*"a!ion !o !he formula!ion of a "hemi"al produ"! 135,000Design of !ools, ;igs, molds and dies160,000abora!or resear"h 215,000
o!al resear"h and developmen! e'pense 520,000
Problem 20-) An&er
#ll "os!s are "harged !o R and D e'pense.
2('
Problem 20-, An&er A
rademar+ 3,000,000Malue in use 120,000 @ )E 2,000,000mpairmen! loss 1,000,000
Pa!en! 2,000,000#mor!ia!ion for 200 2,000,000 @ 5400,000Boo+ value F 12@31@200 1,)00,000Malue in use 500,000 ' 3.46
1,635,000mpairmen! loss 8/ /
Problem 20-'0 An&er B
Carring amoun! of ne! asse!s 1),000,000Malue in use ,000,000 ' 1.512,000,000mpairmen! loss F appli"able !o good(ill 4,000,000
8/11/2019 Financial Accounting chapter 16 - 20
http://slidepdf.com/reader/full/financial-accounting-chapter-16-20 70/70