Chapter 5- Property, Plant and Equipment CHAPTER PROPERTY, PLANT AND EQUIPMENT PROBLEMS 5-1 (Uy Company) Land Office building Warehouse Manager’s residence 5.2 5-3 (6,750,000 (6,750,000 120,000 (6,750,000 (6,750,000 x 2,187,500/5,625,000) x 2,000,000/5,625,000) + 2,625,000 2,520,000 x 937,500/5,625,000) x 500,000/5,625,000) 1,125,000 600,000 (Chang Corporation) a 720,000 x 90 b Down payment Present value of 24 monthly installments 25,000 x 21.24 Total P648,000 P150,000 531,000 P681,000 (Urban Corporation) Land Land purchase P2,000,00 300,000 150,000 Demolition of old building Legal fees for land acquisition Building permit fees Interest on loan for construction Building construction costs Assessment by the city government for sewer connection Landscaping costs* Equipment purchased of use in excavation Fixed overhead allocated to building construction Salvage from the demolished building Sale of excavation equipment Total costs 120,000 Land Improvement s Building P 80,000 270,000 5,000,000 P350,000 800,000 100,000 (70,000) P2,500,00 P350,000 (640,000) P5,610,000 Compensation for injury to construction worker is chargeable to loss; this expenditure could have been avoided had the company obtained insurance on its workers If an insurance was acquired, the amount of premiums paid may be charged to the building being constructed Profit on construction is not recognized anywhere in the accounts The selfconstructed asset should be charged for the actual costs incurred in its completion Modifications to the new building per instruction by the building inspectors is charged to loss since this expenditure is not a necessary expense for the asset This was incurred as a result of the company’s negligence and could have been avoided had proper planning been done 30 Chapter 5- Property, Plant and Equipment *Landscaping costs may be charged to the land account if there is an indication that such an expenditure is permanent in nature 5-4 (Doy Company) Purchase price of land Payments to tenants to vacate premises Demolition of old building Legal fees for purchase contract and recording ownership Title guarantee insurance Proceeds from sale of salvaged materials Total 5-5 P4,000,000 200,000 100,000 50,000 20,000 (10,000) P4,360,000 (Yu Corporation) Land I m pr ov e m en ts P 10,000 Balances, December 31, 2008 Cost of fencing the property Paid to a contractor for building erected Building permit fee Excavation expenses Architect’s fees Invoice cost of machines acquired Freight, unloading and delivery charges Custom duties and other charges Allowances, etc to technicians during installation Balances, December 31, 2009 110,000 P120,000 Buildings P 900,000 2,000,000 20,000 50,000 50,000 P3,020,00 Machinery and Equipment P 980,000 2,000,000 60,000 140,000 400,000 P3,580,000 The interest of P150,000 is an imputed interest and is not recognized anywhere in the financial statements The royalty payments of machines purchased is charged to operating expense for the period 5-6 50,000 55,000 a Cash price b Downpayment P215,000 P Notes payable (35,000 x 3.1699) Preference shares (500 x 110) Cost of machine P215,947 31 110,947 Chapter 5- Property, Plant and Equipment c Purchase price P22,000,000 Appraisal cost Total cost to be allocated Allocation: Land 22,150,000 x 10,000/25,000 8,860,000 Building 22,150,000 x 12,500/25,000 11,075,000 Equipment 22,150,000 x 2,500/25,000 d 25,095 150,000 P22,150,000 P P P 2,215,000 Cash price 800,000 x 90 x 98 Present value of the disposal costs 50,000 x 0.5019 P705,600 Cost of equipment 5.7 P730,695 (Planters Company and Producers Company) Books of Planters Company Cash Equipment Accumulated Depreciation-Building Loss on Exchange of Building Building 50,000 350,000 540,000 60,000 1,000,000 1,000,000-540,000 = 460,000 book value 460,000 – 400,000 = 60,000 loss Books of Planters Company Building Accumulated Depreciation-Equipment Cash Gain on Exchange of Equipment Equipment 600,000-320,000 = 280,000 280,000 – 350,000 = 70,000 gain (Far East Company) a Direct materials P220,000 Direct labor Overhead costs (125% x 150,000 Allocated fixed costs (20% 700,000) 140,000 Total before interest cost Capitalized interest: (300,000 x 10% x 6/12) 15,000 Total cost of equipment P712,500 400,000 320,000 50,000 70,000 600,000 5-8 b Average accumulated expenditures: (697,500/2) 32 150,000 187,500 P697,500 P348,500 Chapter 5- Property, Plant and Equipment Capitalized interest: 300,000 x 10% x 6/12 15,000 P 48,750 x 16% x 6/12 Total capitalized interest 3,900 P 18,900 5-9 (Metro Company) a 4,000,000 x 10% Less interest income earned on temporary investment of loan ( 85,000) Capitalized interest b 40,000 c P400,000 P315,000 1,000,000 x 10% 1,000,000 x 10% x 9/12 1,000,000 x 10% x 6/12 1,000,000 x 10% x 3/12 Total interest Less interest income earned on temporary investment of loan P100,000 75,000 50,000 25,000 P250,000 Capitalized interest P210,000 Computation of average accumulated expenditures: 400,000 x 12/12 P 400,000 1,000,000 x 9/12 750,000 1,200,000 x 5/12 500,000 1,000,000 x 3/12 250,000 400,000 x 0/12 Average accumulated expenditures P1,900,000 Computation of weighted average interest rate: (10% x 1,200,000) + (12% x 1,600,000) 1,200,000 + 1,600,000 Interest of specific borrowing: 1,600,000 x 10% Less interest earned Interest on general borrowing: 300,000 x 11.14% Capitalized interest d 2,800,000 x 10% 1,600,000 x 10% 2,000,000 x 12% Total interest on loans P680,000 Less capitalized interest: (1,900,000 x 10.625%*) Interest expense for 2008 11.14% P160,000 20,000 P140,000 33,420 P173,420 P280,000 160,000 240,000 201,875 P478,125 * 680,000 ÷ 6,400,000 = 10.625% 5-10 (Lim Company) 360,000 x 12/12 P 360,000 33 Chapter 5- Property, Plant and Equipment 600,000 x 7/12 350,000 a b 144,000 1,500,000 x 6/12 1,500,000 x 1/12 Average accumulated expenditures 750,000 125,000 P1,585,000 Interest of specific borrowing (3,000,000 x 12%) Less interest revenue earned from temporary investments of specific borrowing Capitalized interest P 360,000 Interest on specific borrowing (1,200,000 x 12% 49,000 P 311,000 ) P Less interest revenue earned from temporary investments of specific borrowing 49,000 95,000 P Interest on general borrowings 385,000* x 12.14%** Capitalized interest P 46,739 141,739 * 1,585,000 – 1,200,000 = 385,000 ** 680,000 ÷ 5,600,000 = 12.14% 5-11 5-12 a Tooling Machine Automobile Gain on Exchange of Automobile b Machine (new) Accumulated Depreciation-Machine (old) Loss on Exchange of Machine Machine (old) Cash (850,000–340,000)-(1,200,000– 880,000)=190,000 loss (Tan Company) a Depreciation charges for 2008 and 2009 2008 a SL (800,000 – 80,000) / = 90,000 90,000 x 9/12= 67,500 b Hrs 720,000/100,000 hrs = 7.20/hr worked 7.20 x 4,500 hrs = 32,400 c Units 720,000/900,000 units = 0.80/unit of 080 x 40,000 units = 32,000 output d SYD 720,000 x 8/36 x 9/12 = 120,000 e DDB 2/8 = 25% 25% x 800,000 x 9/12=150,000 f 150% DB 1.5/8 = 18.75% 18.75% x 800,000 x 9/12= 112,500 34 172,800 135,000 37,800 1,200,000 340,000 190,000 850,000 880,000 2009 90,000 7.20 x 5,500 hrs = 39,600 0.80 x 60,000 units = 48,000 720,000 x 7.25/36 =145,000 800,000150,000=650,000 25% x 650,000 = 162,500 800,000112,500=687,500 18.75% x 687,500) = 128,906 Chapter 5- Property, Plant and Equipment b Carrying amount of the asset at the end of 2009 Depreciation Method Cost Accum Depr a Straight-line b Hours worked c Units of output d SYD e DDB f 150% declining balance 5-13 (Real a b c P30,000 P18,000 800,000 800,000 800,000 800,000 800,000 800,000 Carrying amount 642,500 728,000 720,000 535,000 487,500 558,594 157,500 72,000 80,000 265,000 312,500 241,406 Company) 2/5 = 40%; 26,400 ÷ 40% = 66,000 12,000 x years = 60,000; 66,000 – 60,000 = 6,000 Carrying amounts, end of year Straight-line (66,000 – 36,000) Sum-of-the-years digits(66,000 – 48,000 = ) = Double-declining balance (66,000 – 52,744) = P13,256 The method with the lowest carrying amount at time of sale will yield the highest amount of gain on disposal.Therefore, the double-declining balance method will provide the highest gain on disposal at the end of year 5-14 5-15 (De Oro Company) a Method Straight-line method Method Sum-of-the-years digits method 320,000 ÷ 80,000 = year life 320,000 x 4/10 = 128,000 320,000 x 3/10 = 96,000 Method 150% declining-balance method 1.5 ÷ = 37.5% 37.5% x 340,000 = 37.5% x (340,000-127,500) = 127,500 79,688 b P80,000 Straight line method Sum-of-the-years digits method 320,000 x 2/10 150% declining balance method 37.5% x (340,000-127,500-79,688) (Citi Company) a Depreciation Expense for 2008 Double-declining balance method 800,000 x 25% x ½ Sum-of-the-years digits method 720,000 x 8/36 x 1/2 Depreciation Expense for 2009 Double declining 700,000 x 25% 35 64,000 49,804 P100,000 80,000 P175,000 Chapter 5- Property, Plant and Equipment Sum-of-the-years’ digits method b 720,000 x 8/36 x 1/2 P80,000 720,000 x 7/36 x ½ 70,000 P150,000 Carrying (book) value at December 31, 2009 Double-declining balance method Date Depreciation Expense for the year 12/31/08 800,000 x 25% X ½ = P100,000 12/31/09 700,000 x 25% = 175,000 Sum of the years’ digit method Cost Accumulated Depreciation, 12/31/09 (720,000 x 11.5/36) 230,000 Carrying value, 12/31/09 CV, end P700,000 525,000 P800,000 P 570,000 5-16 (Total Company) The company changes to the sum-of-the-years digits method Cost Less accumulated depreciation (1,100,000 ÷ 10) x 440,000 Carrying amount of the asset, beginning of 5th year 760,000 Revised depreciation for the 5th year 760,000-100,000 = 660,000; 660,000 x 6/21 188,571 It was estimated that the asset’s remaining life is years Revised depreciation for the 5th year (760,000 – 100,000) / years P1,200,000 P P P 132,000 5-17 (Chartered Company) Cost Less accumulated depreciation 18,000 Carrying amount, January 1, 2009 P 32,000 30,000 x (5+4) / 15 P 14,000 Depreciation expense for 2009 (14,000 x 7/28) 3,500 P 5-18 (Standard Company) Cost P500,000 Less accumulated depreciation: 2005 20% x 500,000 100,000 2006 20% x 400,000 80,000 2007 20% x 320,000 64,000 2008 20% x 256,000 51,200 295,200 Carrying amount, January 1, 2009 P204,800 Depreciation expense for 2009 204,800 – 10,000 = 194,800; 194,800 ÷ years P 38,960 5.19 (Koh Trading) 36 Chapter 5- Property, Plant and Equipment Carrying amount of the asset, January 1, 2009 Estimated remaining life in years Depreciation expense for year ended December 31, 2009 ÷ P153,600 P 19,200 5-20 (Carmi Company) Cost P378,000 Less: Accumulated Depreciation, August 1, 2009(378,000–35,000)/5 x 137,200 Carrying value, August 1, 2009 P240,800 Overhaul costs (capitalized) 80,000 Carrying value after overhaul P320,800 Depreciation (August – December, 2009, see below 22,567 Carrying value, December 31, 2009 P298,233 Depreciation for 2009 (378,000 – 35,000)/5 x 7/12 (320,800 – 50,000) / (5 – 2) + = 270,800 / x 5/12 Total 5-21 5-22 (Chu, Inc.) Accumulated depreciation at January 1, 2008 (528,000 x 4/8) Revised depreciation expense for 2008 528,000-264,000 = 264,000; 264,000 / yrs Accumulated depreciation at December 31, 2009 (Allied Company) Purchase price Residual value Development costs incurred and capitalized during 2007 Depletable cost Estimated supply of mineral resources Depletion expense per ton Number of tons removed during 2008 Depletion expense for 2008 Depletable cost, January 1, 2008 (see above) Less depletion expense for 2008 Add development costs incurred and capitalized during 2009 Depletable cost for 2008 Revised estimated supply of mineral resource, 2009 Revised depletion rate per ton Number of tons removed during 2009 Depletion expense for 2009 5.23 P40,017 22,567 P62,584 (Ong Exploration Company) Purchase price Development costs Salvage value Restoration costs at present value (2,500,000 x 0.4632) Depletable cost Estimated recovery from the property Depletion rate per metric ton Resources extracted during 2008 Depletion expense for 2008 Depletable cost, 2008 (see above) Depletion expense for 2008 Development costs New depletable cost for 2008 37 P264,000 132,000 P396,000 P4,450,000 ( 650,000) 750,000 P4,550,000 ÷3,500,000 P 1.30 x 550,000 P 715,000 P4,550,000 ( 715,000) 961,000 P4,796,000 ÷4,360,000 1.10 700,000 P 770,000 P P45,000,000 1,500,000 ( 6,000,000) 1,158,000 P41,658,000 ÷10,000,000 P 4.1658 x 1,000,000 P 4,165,800 P41,658,000 ( 4,165,800) 750,000 P38,242,200 Chapter 5- Property, Plant and Equipment Remaining number of metric tons (9,250,000-1,000,000) Revised depletion per metric ton (rounded) Number of metric tons removed during 2009 Depletion expense for 2009 5.24 ÷ 8,250,000 P 4.64 x 1,500,000 P 6,960,000 (Family Mining Company) Depletion rate per ton: 4,000,000 + 400,000 – 200,000 1,400,000 tons Depreciation expense per ton: 300,000 – 20,000 1,400,000 tons a P3.00 P0.20 Cost of ending inventory 2,000 units x months Production cost per unit (8.00 + 3.00 + 0.20) Ending Inventory, December 31, 2008 b Cost of goods sold 18,000 units x months Production cost per unit Cost of goods sold for 2008 c Depletable cost in 2008 Less depletion expense for 2008 20,000 units x months Depletion rate per ton New depletable cost for 2009 Revised estimated recovery at January 1, 2009 Revised depletion rate for 2009 12,000 x 11.20 P134,400 108,000 x 11.20 P1,209,600 P4,200,000 120,000 x 3.00 360,000 P3,840,000 ÷ 800,000 P 4.80 Depreciable cost in 2008 P 280,000 Less depreciation expense for 2008 (120,000 units x 0.20) 24,000 Depreciable cost for 2009 P 256,000 Revised estimated recovery at January 1, 2009 ÷ 800,000 Revised depreciation rate for 2009 P 0.32 5-25 (Yap Machine Shop) a Cash Accumulated Depreciation-Building Loss on Disposal of Assets Land Building 1,700,000 450,000 150,000 Cash Accumulated Depreciation-Equipment Loss on Disposal of Assets Equipment 120,000 250,000 30,000 Equipment Cash 298,000 800,000 1,500,000 400,000 298,000 Land Income from Donated Asset 8,000,000 7,800,000 38 Chapter 5- Property, Plant and Equipment Cash 200,000 Land Cash 240,000 Equipment Accumulated Depreciation-Equipment Gain on Disposal of Assets Equipment Cash 150,000 15,000 Building Cash b Beginning balance (3) (4) (5) (6) (7) Total Balance 240,000 22,000 40,000 103,000 28,000,000 28,000,000 Property, Plant and Equipment (Net) 2,150,000 (1) 298,000 (2) 8,000,000 240,000 125,000 28,000,000 38,813,000 Total 36,813,000 1,850,000 150,000 2,000,000 5-26 (Pat Corporation) a Depreciation and amortization expense for year ended December 31, 2009 Buildings 1.5/25 = 6%; (12,000,000-2,631,000) x 6% P 562,140 Machinery and Equipment Based on beginning balance (9,000,000 x 10%) 900,000 Less depreciation of machine destroyed 230,000 x 10% x 9/12 17,250 P 882,750 New machine 2,800,000 + 50,000 + 250,000=310,000 3,100,000 x 10% x 6/12 155,000 Total P1,037,750 Automotive Equipment Based on beginning balance 180,000 Less depreciation of car traded 180,000 x 2/10 36,000 P 144,000 New car 240,000 x 4/10 96,000 Total P 240,000 Leasehold Improvement 1,680,000 x 8/80 P 168,000 b Gain ( loss) from disposal of assets Car traded in Fair value of car traded in (240,000 – 200,000) Book value of car traded Machine destroyed by fire Insurance recovery 39 P 40,000 54,000 P155,000 P(14,000) Chapter 5- Property, Plant and Equipment Book value of machine (230,000 x 4/10 63,000 ) 92,000 Net gain from disposal of assets P 49,000 5-27 a 1/1/07 Equipment Revaluation Surplus Accumulated Depreciation 3,600,000-2,400,000 = 1,200,000 (50% Inc.) 50% x 4,000,000 = 2,000,000 50% x 1,600,000 = 800,000 2,000,00 1,200,000 800,000 b 12/31/0 Depreciation Expense 12/31/0 Revaluation Surplus 12/31/0 Depreciation Expense 12/31/0 Revaluation Surplus c 1/1/09 12/31/0 600,000 Accumulated Depreciation-Equipment 3,600,000 ÷ yrs = 600,000 600,000 200,000 Retained Earnings 1,200,000 ÷ yrs = 200,000 200,000 600,000 Accumulated Depreciation-Equipment 600,000 200,000 Retained Earnings 200,000 Accumulated Depreciation-Equipment Revaluation Surplus Equipment 600,000 400,000 Depreciation Expense 500,000 1,000,000 Accumulated Depreciation-Equipment 2,000,000 ÷ yrs = 500,000 500,000 Revaluation Surplus Retained Earnings 1,200,000-200,000-200,000400,000=400,000 400,000 ÷ yrs = 100,000 Cost Origin al 4.000 M 1/1/07 1/1/07 +2.00 M 6.000 M 07-08 - 40 12/31/0 6.00M 100,000 100,000 1/1/09 1/1/09 -1.00M 5.00M 12//31/0 5.00M Chapter 5- Property, Plant and Equipment Accum 1.600 M 2.400 M CV 5.28 +0.80 M +1.20 M 2.400 M 3.600 M +1.20 M -1.20M 3.60M -0.60M 3.00M 3.50M 2.40M -0.40M 2.00M 1.50M (Lu Company) 2009 Jan Dec 31 Impairment Loss - Machinery Accumulated Depreciation-Machinery (450,000 ÷ yrs) x yrs = 168,750 500,000 – 168,750 = 331,250 331,250 – 200,000 = 131,250 131,250 Depreciation Expense Accumulated Depreciation-Machinery (200,000 – 20,000)÷ yrs = 90,000 90,000 131,250 MULTIPLE CHOICE QUESTIONS Theory MC1 d MC2 c MC3 a MC4 d MC5 d MC6 d MC7 c MC8 b MC9 b MC1 d MC1 MC1 MC1 MC1 MC1 MC1 MC1 MC1 MC1 MC2 b d b d d MC2 MC2 MC2 MC2 MC2 c b c c c d c a b d Problems MC26 MC27 MC28 MC29 MC30 d d c c c 14,400,000 x 5/20 = 3,600,000 200,000 + 3,000 + 6,000 = 209,000 (800,000 – 20,000) x 12/78 x 9/12 = 90,000 780,000 x 11.25/78 = 112,500; 90,000 + 112,500 = 202,500 800,000 – 202,500 = 597,500 41 90,000 Chapter 5- Property, Plant and Equipment MC31 a MC32 c MC33 c MC34 c MC35 a MC36 a MC37 MC38 MC39 d c a MC40 c MC41 b MC42 a MC43 b MC44 c MC45 d MC46 MC47 a d MC48 c MC49 MC50 MC51 b b c MC52 a MC53 d MC54 b 4,500,000 + 30,000 + 6,000 + 40,000 + 60,000 = 4,636,000 Land 10,000 + 50,000 + 90,000 + 45,000 + 150,000 + 9,800,000 = 10,145,000 Building 1,800,000 x 10% = 180,000; 180,000 – 45,000 = 135,000 2,500,000 – 1,800,000 = 700,000 700,000 x 9% = 63,000; 135,000 + 63,000 = 198,000 4,000,000 x 10% x 6/12 = 200,000 750,000 x 12% x 6/12 = 45,000; 200,000 + 45,000 = 245,000 1,000,000 + (4,000,000÷ 2) = 3,000,000; 2,000,000 x 10% = 200,000 1,000,000 x 11% = 110,000; 200,000 + 110,000 = 310,000 4,500,000 + 1,320,000 + 77,000 + 53,000 = 5,950,000 total depreciable cost 112,500 + 66,000 + 9,625 + 13,250 = 201,375 total depreciation expense 5,950,000 ÷ 201,375 = 29.5 yrs 4,800,000 + 1,400,000 + 82,000 + 53,000 = 6,335,000 total cost 201,375 ÷ 6,335,000 = 3.18% 4,500,000 ÷ 40 yrs = 112,500 77,000 x 6/36 = 12,833 240,000 – 12,000 = 228,000; 228,000 ÷ 120 mos = 1,900 per mo 1,900 x 63 mos = 119,700 240,000 – 119,700 = 120,300; 120,300 – 130,000 = 9,700 270,000 x (8+7)/36 = 112,500 270,000 ÷ = 33,750; 33,750 x = 67,500 112,500 – 76,500 = 45,000 1.5/5 = 30% depreciation rate; 600,000 x 30% x ½ = 90,000 600,000 – 90,000 = 510,000; 510,000 x 30% = 153,000 90,000 x (5+4+3)/15 = 72,000 reported accum depreciation under SYD 90,000 x 2/15 = 12,000 240,000 ÷ 40 = 6,000; 240,000 x 90 x.90 x 10 = 19,440; 72,000 x 2/10 = 14,400 160,000/4 = 40,000; 400,000/40,000 = 10 years 240,000 – 40,000 = 200,000; 200,000 – 65,000 = 135,000 (900,000 – 300,000) / yrs = 100,000 600,000 + 100,000 = 700,000 900,000 – 420,000 = 480,000; 480,000 – 300,000 = 180,000 42,000 x 55 = 2,310,000; 2,310,000/7 = 330,000; 330,000 + 5,000 = 335,000 49,200,000 – 43,755,000 = 5,445,000; 5,445,000 ÷ 4.5 years = 1,210,000/yr 1,210,000 x 40 yrs = 48,400,000; 49,200,000 – 48,400,000 = 800,000 20,500 – 6,000 = 14,500; 14,500 – 16,800 = 2,300 40,000 – 30,000 = 10,000; 20,000 – 10,000 = 10,000 Gain 54,000,000 – 6,000,000 + 7,200,000 = 55,200,000; 55,200,000 ÷ 2,400,000 = 23 3,400,000 – 200,000 + 800,000 = 4,000,000 4,000,000 ÷ 4,000,000 = 1.00 per ton; 1.00 x 375,000 tons = 375,000 P0 for Quarry No since the asset is only being leased 1,000,000 – 300,000 = 700,000; 700,000 ÷ 100 M = 0.007 per ton 0.007 x 1,380,000 = 9,660 007 x 40,000,000 = 280,000; 700,000 – 280,000 = 420,000 420,000 ÷ 20,000,000 = 0.21; 0.21 x 1,380,000 = 28,980 42 Chapter 5- Property, Plant and Equipment MC55 b MC56 c MC57 d MC58 c MC59 b MC60 b MC61 a MC62 MC63 d c MC64 c MC65 b 3,600,000 ÷ 800,000 = 4.50; 4.50 x 60,000 = 270,000 96,000 – 6,000 = 90,000; 90,000 ÷ 800,000 = 0.1125 0.1125 x 60,000 = 6,750 (8,600,000-600,000) ÷ 40 yrs = 200,000; 200,000 x yrs = 1,000,000 8,600,000-1,000,000-600,000 = 7,000,000; 7,000,000 ÷ 30 yrs = 233,333 8,000,000 – 1,000,000 – 233,333 = 7,366,667 7,500,000 – 7,366,667 = 133,333 160,000 x 10 yrs = 1,600,000; 4,000,000 – 1,600,000 = 2,400,000 3,240,000 – 2,400,000 = 840,000 4,000,000 ÷ 160,000 = 25 years; 25 – 10 = 15 years remaining 3,240,000 ÷ 15 = 216,000 160,000 x yrs = 1,440,000; 4,000,000 – 1,440,000 = 2,560,000 2,560,000 – 500,000 = 2,060,000; 2,060,000 ÷ 16 yrs = 128,750 2,060,000 – 128,750 = 1,931,250; 3,240,000 – 1,931,250 = 1,308,950 160,000 – 128,750 = 31,250; 500,000 – 31,250 = 468,750 1,308,750 – 468,750 = 840,000 (360,000 ÷ 6) x 2.5 yrs = 150,000 360,000 – 150,000 = 210,000 book value; 210,000 – 70,000 = 140,000 loss 70,000 ÷ 3.5 remaining years = 20,000; 70,000 – 20,000 = 50,000 1,800,000 – 600,000 = 1,200,000; 600,000 ÷ = 200,000 1,200,000 + 200,000 = 1,400,000 3,000,000 – 300,000 = 2,700,000; 2,700,000 ÷ 10 = 270,000 270,000 x = 1,080,000 3,000,000 – 1,080,000 = 1,920,000; 1,920,000 – 900,000 = 1,020,000 1,920,000 ÷ yrs = 270,000 or 2,700,000 ÷ 10 yrs = 270,000 43 ... traded in Fair value of car traded in (240,000 – 200,000) Book value of car traded Machine destroyed by fire Insurance recovery 39 P 40,000 54,000 P155,000 P(14,000) Chapter 5- Property, Plant and