1. What is the correct inital cost of the replacement equipment acquired on October 31?2. What is the gain on sale of the office equipment on September 1? You were assigned to audit the Property, plant and equipment account of yourcontinuing audit client Lolita Corp. for the period ended December 31, 2021. ThePPE file in the permanent working paper and in the prior year working paperincluded the following schedule:December 31, 2020 balancesDebitCreditLand5,600,000Office Building9,800,000Accumulated depreciation OB1,862,000Factory Building4,500,000Accumulated depreciation FB978,750Office Equipment5,000,000Accumulated depreciation - OE1,250,000Factory Machineries9,000,000Accumulated depreciation FM2,798,182All assets were acquired at the inception of operations at the beginning of 2019 andare being depreciated through the following policies:Office Building - Double-declining balance over 20 years (10% salvage valuebased on cost)Factory Building - SYD over 15 years (10% salvage value based on cost)Office Equipment - Straight-line method over 8 years (no salvage value)Factory Machineries - SYD over 10 years (10% salvage value based on cost)Transactions for 2021 were as follows:• An new elevator system costing P800,000 was installed on the company's OfficeBuilding and was completed in early January.• On March 31, the company traded a new factory machinery with a cash price ofP6M for one of its old Factory Machinery with an original cost of P4M. Thetrade-in value agreed upon on the old machinery was at P2.2M. The companypaid the difference in cash.• On September 1, a piece of office equipment was sold for P2M. The officeequipment had an original cost of P3.2M. On October 31, a replacement officeequipment was acquired on installment basis. A P500,000 down-payment wasmade plus a P3M note payable in three equal installments starting October 31,2022. The interest rate appropriate for this transaction was ascertained at 10%.Installation and commissioning cost were incurred at P65,890. Estimateddecommissioning cost upon retirement was also estimated at P101,302.

Equipment replacement: A common approach to the problem of machine switching emphasizes the…

Answered: 1. What is the correct inital cost of…

1. What is the correct inital cost of the replacement equipment acquired on October 31? 2. What is the gain on sale of the office equipment on September 1?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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