Chapter 2 - Property, Plant, and Equipment

MC17

C.

MC18

a.

depreciation expense is the

productive-output method.

b.

group composite method.

sum-of-the-years' digits method.

d. double declining balance method.

Which of the following statements is incorrect?

Donations of property, plant and equipment should be

recorded at the fair value of the donated asset.

assets based on their carrying values.

Property acquired in exchange for shares or other securities

of the enterprise should be recorded at its fair value or the

fair value of the securities, whichever is more clearly

evident.

When property is acquired in exchange for another asset

its cost is usually determined by reference to the fair value

of the asset surrendered.

b.

C.

d.

MC19 The sum-of-years digits method of depreciation results in a/an

a. constant charge over the life of the asset.

b. decreasing charge over the life of the asset.

c. increasing charge over the life of the asset.

d. charge based on the expected use or output of the asset.

MC20

How are grants related to depreciable assets accounted for?

a.

b.

C.

Recognized in profit or loss during the year of grant,

Recognized directly in shareholders' equity during the year

of grant.

Recognized in other comprehensive income and transferred

to profit or loss as the asset is depreciated.

Initially recorded as a deferred credit and transferred profit

or loss over the periods and in the proportion in which

depreciation expense on the asset is recognized.

d.

MC21

Depreciation, as generally used in accounting, is

a.

b.

C.

a process of asset valuation for purposes of the statement o

financial position.

applicable only to long-lived intangible assets.

used to indicate a decline in market value of a long-live-

asset.

the systematic allocation of the depreciable amount of a

asset over its useful life.

d.

174
A method that ignores salvage value in calculating periodi

the lump sum price should be allocated to the individual

8.

Chapter 2 - Properts. Plant and Equipment

MC22 Which of the following statements is incorrect?

MC23 An asset's carrying amount is the

b.

d.

cost of an asset or the amount substituted for cost in the

financial statements, less its residual value.

b.

amount of cash or cash equivalent paid or the fair value of the

other consideration given to acquire an asset at the time of its

acquisition or construction.

net amount which the enterprise expects to obtain an asset at

the end of its useful life after deducting expected costs of

disposal.

d. amount at which an asset is recognized in the statement of

financial position after deducting any

accumulated

depreciation and accumulated impairment loss.

The depreciable amount of item of property, plant and

equipment shall be allocated on a systematie basis over its

useful life.

The depreciation method used shall not reflect the pattern in

which the asset's economic benefits are consumed by the

entity

The depreciation charge for each period shall be recognized as

an expense unless it is included in the carrying amount of

another asset.

The estimation of the useful life of an item of property, plant

and equipment is a matter of judgment based on the

experience of the entity with similar assets.

a.

c.

MC24 The estimated life of a building that has been depreciated 5 years of

an originally estimated life of 25 years has been revised to a

remaining life of 15 years. Based on this information, the

accountant should

a.

C.

continue to depreciate the building over the original 25-year

life.

b. depreciate the remaining book value over the remaining life of

15 years.

adjust the accumulated depreciation to its appropriate balance

through net income based on a 20-year life and then depreciate

the adjusted book value as though the estimated life always

been 20 years.

d. adjust the accumulated depreciation to its appropriate balance

through retained earnings based on a 20-year life and then

depreciate the adjusted book value as though the estimated life

had always been 20 years,

A machine with a five-year estimated useful life and an estimated

increase in accumulated depreciation for 2019 using the double

Chapter 2 - Property, Plant, and Equipment

MC25

15% salvage value was acquired on January 1, 2018,

declining balance method would be

a.

b.

C.

d.

original cost x 85% x 40%.

original cost x 40%.

original cost x 85% x 60% x 40%.

original cost x 60% x 40%.

MC26

Which of the following statements is incorrect?

a.

b.

If an item of property, plant and equipment is revalued, the

entire class of property, plant and equipment to which tha:

asset belongs shall be revalued.

The depreciation method used shall reflect the pattern in

which the asset's future economic benefits are expected to

be consumed by the entity.

The carrying amount of an item of property, plant and

equipment shall be derecognized on disposal or when no

future economic benefits are expected from its use or

disposal.
Recoverable amount is the lower of an asset's net selling

price and its value in use.

c.

d.

MC27

If an asset's carrying amount is decreased as a result of a

revaluation, the decrease shall be recognized in profit or loss.

However, if there is a revaluation surplus account balance as a

result of prior revaluation, the decrease shall be

a.

b.

debited directly to equity for the entire amount of the

decrease.

debited directly to revaluation surplus to the extent of its

balance and any remainder of the decrease is debited to

retained earnings.

debited directly to equity to the extent of the balance of

revaluation surplus and any remainder of the decrease is

recognized in profit or loss.

ignored.

C.

d.

Chapter 2 - Properti Plant and Equipment

MC28 the Asset's carrying amount is increased as result of

revaluation, the increase be

credited directly to equity under the heading of revaluation

recognized in profit or loss.

credited directly to retained earnings.

surplus

b.

C.

d.

ignored.

MC29

b.

The recoverable amount of a cash generating unit is the

selling price less cost to sell.

discounted cash flow from the use and disposal of the unit,

higher between the selling price less cost to sell and the

discounted cash flow from the use and disposal of the unit

lower between the selling price less cost to sell and the

discounted cash

flow from the use and disposal of the unit.

C.

d.

MC30

When testing for impairment and fair value of the asset is not

reliably determinable, the recoverable amount is

a.

b.

the undiscounted cash flow from the use and sale of the

asset.

the discounted cash flow from the use and sale of the asset.
the discounted cash flow after tax from the use and sale of

the asset.

not computed and the asset is not considered impaired.

C.

d.

MC31

Safeway Supermarket is selling an old delivery truck. The truck

is fully depreciated, with no salvage value. Which of these

statements will apply?

a.

b.

Safeway will record a gain on the sale of the truck.

A gain will be reported on the statement of comprehensive

income

Safeway must write off both the original cost of the truck

and the accumulated depreciation when the truck is sold.

All of the above statements will apply.

C.

d.

MC32

a.

Which of the following expenditures could not be appropriately

recognized as exploration and evaluation assets?

Costs of topographical, geochemical and geophysical studies

b.

Costs of activities in relation to evaluating the technical

feasibility and commercial viability of extracting a mineral

Expenditures related to development of mineral resources.

Costs of exploratory drilling

resource

c.

d.

Either as property, plant and equipment or intangible

Neither property, plant and equipment nor intangible assets

After initial recognition of exploration and evaluation assets, they

Chapter 2 - Property, Plant, and Equipment

MC33

As property, plant and equipment

b. As intangible assets

How are exploratory and evaluation assets classified on the

assets, depending on the nature of the assets

d.

MC34

are measured in the statement of financial position using

a.

b.

C.

cost model

revaluation model.

either cost model or revaluation model, based on the

accounting policy adopted by the enterprise.

fair value model.

d.

MC35 Improvements which result to increased future economic benefits

include all of the following, except

a.

substantial

b.

modification of an item to extend its useful life, including an

increase in its capacity.

upgrading of machine parts to achieve

improvement in the quality of output.

adoption of new production process enabling a substantial

reduction in previously assessed operating costs.

cost of servicing and overhauling to restore or maintain the

originally assessed standard of performance.

C.

d.

MC36 Wong Company purchased land, land improvements and building

from Cola Company for P14.4M and from Sarsi Company furniture

and equipment for P18.6M. The total cash outlay for the

transactions amounted to P33.0M. The appraised values of the

assets are as follows:

Building - P5.0 M

Equipment - P3.0 M

Furniture - P1.0 M

Land - P13.5 M

Land improvements - P1.5 M.

The allocated cost of the building is

a.

b.

C.

•d.
P6,875,000

P6,785,000

P4,600,000

P3,600,000

Chapter 2 - Property, Plant and Equipment

MC37 An old cooler with a recorded cost of P150,000 and accumulated

depreciation of P140,000 was sold for P4,000. A new cooler with

marked price of P200,000 was purchased on February 10, 2019.

Freight charge of P3,000 and installation cost of P6,000 were paid.

What is the cost of the new cooler?

P200,000

P204,000

P209,000

P210,000

a.

b.

d.

MC38 The Oh Trading Company exchanged 1,000 shares of Bon Company

ordinary shares which Oh was holding as financial assets at fair

value through profit or loss (FVPL), for a piece of equipment from

Gem Company

The Bon ordinary shares, which had been

purchased by Oh for P31 per share, had a quoted market value of

P34 per share at the date of exchange and P30 per share as of last

reporting date.

How would the acquisition be recorded?

a.

30,000

Equipment

Financial Assets at FVPL

30,000

31,000

b.

- Equipment

Financial Assets at FVPL

Gain on Sale of Securities

30,000

1,000

c.

31,000

3,000

Equipment

Loss on Sale of Securities

Financial Assets at FVPL

34,000

34,000

d.

Equipment

Financial Assets at FVPL

Gain on Sale of Securities

30,000

4,000

MC39 On April 1, 2019, Wang Manufacturing Company bought a new

equipment for P800,000. The equipment has an estimated salvage

value of P20,000 and useful life of 12 years. Depreciation is

computed using the sum-of-the-years digits method.

How much is the amount of depreciation for 2019?

a.

b.

C.

d.

P20,000

P60,000

P75,000

P90,000

What is the care

value of this asset in the statement of financial position

Chapter 2 - Property, plant, and Equipment

MC40 Use the same information given in MC39

December 31, 2020?

b.

c.

d.

P574,800

P577,500

P597,500

P614,800

P4,500,000

30,000

6,000

10,000
MC41 The following expenditures were incurred by the Keng, Inc. in 2019

Cost of land

Expenses of land survey

Expenses for search of land titleFiga

Building permit fee

Temporary building to house materials and

construction workers

Demolition of old building

Payments to tenants to vacate the premises of old

building

Payments to some construction worker for injuries

sustained (no insurance was carried)

Interest on temporary loan for construction

Cost of paving parking area adjoining building

Excavation expenses for foundation of building

Cost of construction

50,000

40,000

60,000

85,000

90,000

45,000

150,000

9,800,000

Using the interpretations of the PIC, what are the costs of the land

and building, respectively?

a.

b.

P4,636,000 and P10,245,000

P4,461,000 and P10,310,000

P4,596,000 and P10,185,000

P4,536,000 and P10,245,000

C.

d.

MC42 During 2019, Bing Company constructed its own equipment costing

P5,000,000. The weighted average accumulated expenditure on

these assets during 2019 was P2,500,000.

To help finance the

construction, P1,800,000 was borrowed at 10% on January 1, 2019,

and funds not needed for construction were temporarily invested in

short-term securities, yielding P45,000 in interest revenue.

than the construction funds borrowed, the only other debt

outstanding during the year was a P2,500,000, 10-year, 9% notes

payable dated January 1, 2019.

Other

Chapter 2 - Property, Plant and Equipment

What is the amount of interest that should be capitalized by Bing

MC3 Ging Company borrowed P4,000,000 on a 10% note payable to

finance a new warehouse Ging is constructing for its own use. The

during 2019?

P250,000

P243,000

P198,000

P135,000

C.
d.

payable

only other debt on Ging's books is a P6,000,000, 12% mortgage

on an office building. The construction of the warehouse

was completed in

six months and the average accumulated

expenditures amounted to P4,750,000.

amount of interest that Ging Company should

What is the

capitalize?

a.

P200,000

P237,500

P245,000

P490,000

d.

MC44 Go Kong Company decided to construct its own building. The total

expenditures until completion amounted to P5,000,000, of which

P1,000,000 was paid on January 2, 2019 and the remaining

amount of P4,000,000 was incurred evenly throughout the year.

A 10% note directly related to the project (specific borrowing) was

issued on January 2, 2019 with a face value of P2,000,000. During

2019, borrowings not directly related to the project were:

P5,000,000, 5-year, 12% note and P2,000,000, 3-year, 8.5% note.

How much is the capitalized interest for 2019?

a.

b.

c.

d.
1970,000

P530,000

P310,000

P200,000

MC45 On October 5, 2019, Bancnet Company traded its old delivery

equipment with Megalink Company's office equipment. The

following data are available:

Bancnet's

Megalink's

books

books

P 40,000

P 50,000

Accumulated depreciation

30,000

38,000

Fair value

20,000

17,000

Cash received from Megalink

3,000

Cash paid to Bancnet

Cost

3,000

181

and the gain to be recognized on the books of Bancnet Company

For financial reporting purposes, the cost of the office equipm

MC46 X-ray Company traded in an old machine having a carrying amoun

of P16,800, and paid a cash difference of P6,000 for a new machi

Chapter 2 - Property, Plant, and Equipment

should respectively, be

a.

b.

P20,000 and P10,000

P 7,000 and PO

P17,000 and P10,000

P10,000 and PO

d.

having a total cash price of P20,500.

What amount of loss should X-ray Company recognize on this

exchange?

a.

b.

PO

P2,300

P3,700

P6,000

C.

d.

MC47 A summary of the fixed assets owned by Sy. Manufacturing Compan

is presented below:

Patterns

Factory

Building

P4,800,000
300,000

Machinery

& Equipment

P1,400,000

80,000

Total cost

Est. residual value

Est. useful life

Small

Tools

P82,000 P53,000

5,000

8 yrs.

40 yrs.

20 yrs.

The composite life of the assets listed above is

a.

b.

C.

d.

29.5 years

31.6 years

32.8 years

34.5 years

MC48 Use the same information given in MC47. What is the composite

rate of the assets listed?

a.

b.

3.18%
3.38%

3.81%

3.83%

d.

Chapter 2 - Property, plant and Equipment

MC49 Use the same information given in MC47. Anuming the straight

line method is used. depreciation on the factory building for the

MC50 Use the same information given in MC47. Assuming the sum-of

third year of its service life is

B.

P120,000

b.

P118,500

P115,500

P112,500

the-years digits' method is used, depreciation on the small tools on

the third year of its service life is

P17,110

b. P14,972

c. P12,833

d. P10,694

(Phil CPA Adapted)

MC51 The Hong Company purchased for P240,000 cash on July 1, 2014 a

machine with an estimated useful life of 10 years and an estimated

residual value of P12,000. Depreciation was recorded on a monthly

basis using the straight-line method.

The machine was sold for

P130,000 on September 30, 2019.

The sale resulted in a

a.

b.

P9,700 gain.

P9,700 loss.

P21,700 gain.

P21,700 loss.

C.

d.

MC52 Chua, Inc., engaged in manufacturing business, purchased

equipment for P300,000 on January 1, 2018 to be used in its

operations. The equipment was estimated to have a useful life of 8

years, with salvage value estimated at P30,000. Among the various

methods of depreciation, Chua selected the SYD method.

On December 31, 2019, the related accumulated depreciation

should have a balance of

a.

b.

C.

d.

P37,500 less than under the straight-line method.

P37,500 less than under the double-declining balance.

P45,000 greater than the straight-line method.

P45,000 greater than the double-declining balance

MC53 King Company purchased a machine on July 1, 2018 for P600,000

The machine has an estimated useful life of five years and a salvage

value of P80,000. The machine is being depreciated from the date of

acquisition by the 150% declining balance method.

183

Chapter 2 - Property, Plant, and Equipment

For the year ended December 31, 2019. King should

depreciation expense on this machine of

MC

b.

P180,000

P153,000

P90,000

P 78,000

MC54 Ping Company's schedule of property and equipment is as follows

Factory

Plant

Building Equipment

Total cost

P260,000

P240,000

Salvage value

20,000

16,000

Est. life in years

40

20

Depreciation Straight line

Constant rate

method

of 10% on

declining

balance

Other

Fixtures

P78,000

6,000

Sum-of-the-

years digits

What will be the annual depreciation charges for each class of

assets for the third year of service life?

a.

b.

Factory Building

P6,000

P6,000

P6,000

P6,000

Plant Equipment

P19,440

P19,440

P18,144

P18,144

Other Fixtures

P21,600

P14,400
P14,400

P21,600

C.

d.

(Phil. CPA Adapted

MC55 Qui Corporation takes a full year's depreciation expense in the year

of an asset's acquisition, and no depreciation expense in the year of

disposition. Data relating to one of Qui's depreciable assets at

December 31, 2018 are as follows:

Acquisition year - 2016; Estimated useful life - 5 years; Cost -

P110,000; Residual value - P20,000; Accumulated depreciation

P72,000.

Using the same depreciation method as used in 2016, 2017, and

2018, how much depreciation expense should Qui Corporation

record in 2019 for this asset?

a.

b.

C.

d.

P12,000

P18,000

P22,000

P24,000

Chapter 2 - Property, Plant and Equipment

MC56 On January 1, 2019, Kong Company owned a

carrying amount of P240,000. The machine was purchased four

years ago for P400,000. Kong uses straight-line depreciation. Kong

determined that the machine suffered permanent impairment of its

operational value and will not be economically useful in its

production process after December 31, 2019.

machine for P65,000 on January 5, 2020. The financial statements

machinery having a

Kong sold the

for 2019 were issued on February 15, 2020.

In its statement of comprehensive income for the year ended

December 31, 2019, Kong should recognize a loss of

a.

b.

P200,000

P175,000

P135,000

PO

C.

d.

MC57 The LBC Co. determined that, due to obsolescence, equipment with

an original cost of P900,000 and accumulated depreciation at

December 31, 2019, of P420,000 had

suffered permanent

impairment, and as a result should have a carrying value of only

P300,000. In addition, the remaining useful life of the equipment

was reduced from eight years to three years.

What is the impairment loss recognized on December 31, 2019?

a.

b.

c.
d.

P180,000

P120,000

P100,000

PO

MC58 Use the same information given in MC57. In its December 31,

2020 statement of financial position, what amount should LBC

report as accumulated depreciation?

a.

b.

c.

d.

P100,000

P520,000

P600,000

P700,000

was

MC59 On December 31, 2015, Lin Co. purchased an equipment with an

estimated useful life of 10 years. The equipment was expected to

have a residual value of P5,000 at the end of its service life. The

sum-of-the-years-digits

method

used in

computing

depreciation.

For the year ended December 31, 2019, the

depreciation applicable to this equipment was P42,000.

Chapter 2 - Property, Plant and Equipment

MC56 On January 1, 2019, Kong Company owned a

carrying amount of P240,000. The machine was purchased four

years ago for P400,000. Kong uses straight-line depreciation. Kong

determined that the machine suffered permanent impairment of its

operational value and will not be economically useful in its

production process after December 31, 2019.

machine for P65,000 on January 5, 2020. The financial statements

machinery having a

Kong sold the

for 2019 were issued on February 15, 2020.

In its statement of comprehensive income for the year ended

December 31, 2019, Kong should recognize a loss of

a.

b.

P200,000

P175,000

P135,000

PO

C.

d.

MC57 The LBC Co. determined that, due to obsolescence, equipment with

an original cost of P900,000 and accumulated depreciation at

December 31, 2019, of P420,000 had

suffered permanent

impairment, and as a result should have a carrying value of only

P300,000. In addition, the remaining useful life of the equipment

was reduced from eight years to three years.

What is the impairment loss recognized on December 31, 2019?

a.

b.

c.

d.

P180,000

P120,000

P100,000

PO

MC58 Use the same information given in MC57. In its December 31,

2020 statement of financial position, what amount should LBC

report as accumulated depreciation?

a.

b.

c.

d.

P100,000

P520,000

P600,000

P700,000

was

MC59 On December 31, 2015, Lin Co. purchased an equipment with an

estimated useful life of 10 years. The equipment was expected to

have a residual value of P5,000 at the end of its service life. The

sum-of-the-years-digits

method

used in

computing

depreciation.
For the year ended December 31, 2019, the

depreciation applicable to this equipment was P42,000.

MC60 On July 1, 2015, Ling Company purchased a building the

months depreciation was taken in the year of purchase and the

P49,200,000. The building has an estimated life of 40 years.

book value of the building on December 31, 2019, after the

mine for P3,400,000 with removable ore estimated by geological

surveys at 4,000,000 tons. The property had an estimated value of

The company incurred and capitalized P800,000 of development

costs preparing the mine for production. During 2019, 400,000

Chapter 2 - Property, Plant, and Equipment

What was the acquisition cost of the equipment?

b.

C.

d.

P293,750

P325.000

P330,000

P335,000

(Phil. CPA Adaple

depreciation adjusting entry is P43,755,000.

What is the salvage value of the building?

a.

b.

P5,640,000

P5,445,000
P800,000

PO

c.

d.

(Phil. CPA Adapted

MC61 The Haw Mining Company purchased a tract of land containing

mineral resource for P54,000,000. The purchase contract containes

a provision that Haw is required to restore the land suitable for

factory use after it has extracted the mineral resource. Geological

surveys have indicated that 2,400,000 tons of ore could be

extracted.

The property has an estimated salvage value of

P6,000,000 after the ore has been extracted and the land is

restored. The estimated cost of restoration and geological survey is

P7,200,000 which is the present value at date of acquisition.

Assuming that Haw does not maintain inventories of extracted ores

how much should be charged to depletion expense per ton of

extracted mineral ore?

a.

b.

P20.00

P22.50

P23.00

P25.50

C.

d.

MC62 In January 2019, the Real Mining Company purchased a minera

(AICPA Adapted

P200,000 after the ore has been extracted.

tons were removed and 375,000 tons were sold.

MC63 On July 1, 2019, West Mining Company paid P3,600,000 for mining

Chapter 2 - Property, Plant and Equipment

What is the amount of depletion that Real should include in its cost

of goods sold for 2019

P375,000

P393,750

P400,000

P320,000

(AICPA Adapted)

C.

d.

property with a supply of natural resources estimated at 800,000

tons. The mining firm expects to extract and sell 10,000 tons of the

resources a month. Operations started immediately. The selling

price is P20 per ton. West uses percentage (15%) depletion for tax

purposes and uses calendar accounting period.

For use in production, the company also bought some new

equipment on July 1, 2019. The equipment cost P96,000 and had

an estimated life of 12 years. However, after all the natural

resources are extracted from the mine, the equipment will be of no

use and will be sold for an amount of P6,000.

If sales and production come out as expected, what is the

depletion and depreciation expense, respectively, for financial

reporting purposes for the calendar year 2019?

a. P135,000 and P5,200

b. P270,000 and P6,750

C. P300,000 and P14,400

d. P540,000 and P15,000

(AICPA Adapted)

MC64 Ventures Mining Company quarries limestone at two locations,

crushes it and sells it to be used in road building. The Revenue

Code provides for 5% depletion on such limestone.

Quarry No. 1 is leased, the company paying a royalty of P0.10 per

ton of limestone quarried. Quarry No. 2 is owned, the company

having paid P1,000,000 for the site. The company estimated that

the property can be sold for P300,000 after production ceases.

Other data follow:

Quarry No. 1

30,000,000

2,000,000

800,000

P6,000,000

Quarry No. 2

100,000,000

40,000,000

1,380,000

P10,000,000

Estimated total reserves (in tons)

Tons quarried through 12/31/18

Tons quarried in 2019

Sales in 2019
A

What is the 2019 depletion expense of Quarry No. 1 and Quarry

Assuming that she

beginning of 2019, it was determined that the estimated recoverall

limestone from Quarry No. 2 is 20,000,000 tons, what is the renes

Chapter 2 - Properti Plant, and Equipment

No. 2, respectively, for financial reporting purposes?

P30,000 and P9,660

P80,000 and P9,660

PO and P96,600

d. PO and P9,660

MC65 Use the same information given in MC64.

depletion expense for Quarry No. 2 for the year 2019?

b.

c.

d.

P31,128

P28,980

P 9,660

P2,898

(AICPA Adapted

MC66 A building was constructed and finished on January 1, 2014. The

total cost is P8,600,000. It was estimated to last up to January 1.

2054 with salvage value at P600,000. Depreciation is on a straight.

line method. On February 1, 2016, repairs costing P50,000 wen

made on the building. The repairs did not increase the value ne
the life of the building.

During 2019, after the financial statements for 2018 have bees

issued, it was estimated that the building would last up to Januan

1, 2049 without any change in the estimated residual value. On

December 31, 2019, the building was sold for P7,500,000.

What is the depreciation charge for 2019?

a.

b.

P200,000

P228,570

P233,333

P257,150

c.

d.

MC67 Use the same information given in MC 66. How much is the gsun

(loss) as a result of the sale of the building?

a.

b.

c.

d.

P(100,000)

P(375,000)

P500,000

P133,333

Chapter 2 - Property, Plant and Equipment

MC68 A building was acquired on January 1, 2009 at an original cost of

P4,000,000 (no residual value). Depreciation on the building is

computed on a straight line basis and the annual depreciation on

cost is P160,000. On December 31, 2018, the building is appraised

at a fair market value of P3,240,000. The appraisal results are to be

recognized in the

accounts considering the same remaining life for

the building.

What is the amount that should be credited to Revaluation Surplus

at December 31, 2018?

-a.

b.

c.

d.

P1,400,000

P3,000,000

P 840,000

РО

MC69 Use the same information given in MC68. What is the revised

depreciation expense recognized in the accounts for the year ended

December 31, 2019?

a.

b.

P160,000

P216,000

P360,000

P272,000

C.

d.

MC70 A building was acquired on January 1, 2010 at an original cost of

P4,000,000 (no residual value). Depreciation on the building is

computed on a straight line basis and the annual depreciation on

cost is P160,000. An impairment loss of P500,000 was recognized

on December 31, 2018 and depreciation for year 2019 was

computed based on the asset's recoverable amount at December 31,

2018.

On December 31, 2019, the entity decided to measure its building

accounts using the revaluation model.

This building was then

appraised at a fair market value of P3,240,000.

What is the revaluation surplus recorded in this building account

on December 31, 2019?

a.

b.

c.

d.

P1,340,000

P840,000

P 340,000

PO

MC71 On July 1, 2016. McLean Corp. purchased computer equipmen

cont of P360,000. This equipment was estimated to have a boy

life with no residual value and was depreciated by the sur

On December 31, 2018, McLean determined that

equipment could no longer process data efficiently, that its

had been permanently impaired, and that P70,000 could

Chapter 2 - Property, Plant, and Equipment

method

recovered over the remaining useful life of the equipment.

What is the impairment loss recognized in the accounts

December 31, 2018?

MC7

b.

c.

d.

P140,000

P70,000

P 50,000

P20,000

What is the asset's

MC72 Use the same information given in MC71.

carrying amount at December 31, 2019?

a.

b.

P210,000

P140,000

P70,000

P50,000

d.

MC73 France Company determined that due to obsolescence, equipment

with original cost of P1,800,000 and accumulated depreciation at

December 31, 2018 of P840,000 had

suffered permanent

impairment and as a result should have a carrying value of only

P600,000 at that date. In addition, the remaining useful life of the

equipment was reduced from eight to three years.

In its December 31, 2019 statement of financial position, what

amount should France report as accumulated depreciation?

a.

b.

c.

d.

P1,200,000

P1,360,000

P1,400,000

P1,500,000

MC74 The following data pertain to an equipment owned by Jom

Manufacturing Company which was recently appraised:

P1,500,000

Cost

Accumulated Depreciation (as of the date

of revaluation; asset life is 10 years;

straight-line method)

Appraisal results:

Replacement cost

Residual value

600,000

3,000,000

300,000

190

MC75 Use the same information given in MC74.

Chapter 2 - Property, Plant and Equipment

What is the revaluation surplus recognized at time of revaluation,

assuming there is no change in the estimated life of the asset?

P1,920,000

b.

P1,500,000

c.

P1,020,000

d.

P 900,000

What is the annual

depreciation expense subsequent to revaluation?

a.

b.

P320,000

P270,000

P170,000

P120,000

C.

d.