Faye, Inc. finished constructing its factory on Jan. 1, 2012 at a total cost of P80,000,000. The factory has an estimated useful life of 40 years with no residual value. On Jan. 1, 2021, Faye replaced the walls on one of the areas of the factory at a total cost of P10,000,000. The estimates reveal that the cost allocated to the walls is P5,000,000. This improvement will increase the life of factory by 5 years. How much is the Loss on Replacement to be recognized on Jan. 1, 2021?

Faye, Inc. finished constructing its factory on Jan. 1, 2012 at a total cost of P80,000,000. The factory has an estimated useful life of 40 years with no residual value. On Jan. 1, 2021, Faye replaced the walls on one of the areas of the factory at a total cost of P10,000,000. The estimates reveal that the cost allocated to the walls is P5,000,000. This improvement will increase the life of factory by 5 years. How much is the Loss on Replacement to be recognized on Jan. 1, 2021?

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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Faye, Inc. finished constructing its factory on Jan. 1, 2012 at a total cost of P80,000,000. The factory has an estimated useful life of 40 years with ho residual value. On Jan. 1, 2021, Faye replaced the walls on one of the areas of the factory at a total cost of P10,000,000. The estimates reveal that the cost allocated to the walls is P5,000,000. This improvement will increase the life of factory by 5 years. How much is the Loss on Replacement to be recognized on Jan. 1, 2021?.
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