Question 4: Rachel co. acquired an old 5-story building of 500,000 at cost and renovated it into a modern office building. Renovation costs and other details are as follows: - Renovation costs (i.e. repainting, floor replacing, windows/doors remodeling, ...): 20,000 - An elevator installed for the first time: 40,000 - New modern air condition system: 15,000. The office building was ready for intended use at 01 January 20X7 which being depreciated over 25 years by straight line basis. The elevator has 10 years of estimated life and that of air condition system is 20,000 operating hours. No residual values are attributed to any of the component parts. There were several events as following: (i) In 20X9, Rachel started to extend a new floor at the top of the building for meeting rooms. Total extension cost was 22,000. This project was finished in 31 December 20X9. (ii) At 01 September 20Y0, the air condition system was partly damaged due to a fire accident and was repaired at a cost of 5,000. However, its remaining estimated life was shortened to 4,000 hours. Records about air condition operating hours: - Accumulated operating hours to 31 August 20Y0: 12,000 hours - Operating hours from 01 January to 31 August 20Y0: 2,000 hours - Operating hours from 01 September to 31 December 20Y0: 250 hours. (iii) Annual maintenance cost for elevator incurred in 20Y0: 2,000. Required: 1. Show your solutions of PPE recognition and measurement at 01 January 20X7 with explanation? 2. Show your accounting treatments with costs incurred in those events given in the case with explanation? 3. Calculate the charges to P/L account in respect of the building and its parts for the year ended 31 December 2010.
Question 4: Rachel co. acquired an old 5-story building of 500,000 at cost and renovated it into a modern office building. Renovation costs and other details are as follows: - Renovation costs (i.e. repainting, floor replacing, windows/doors remodeling, ...): 20,000 - An elevator installed for the first time: 40,000 - New modern air condition system: 15,000. The office building was ready for intended use at 01 January 20X7 which being depreciated over 25 years by straight line basis. The elevator has 10 years of estimated life and that of air condition system is 20,000 operating hours. No residual values are attributed to any of the component parts. There were several events as following: (i) In 20X9, Rachel started to extend a new floor at the top of the building for meeting rooms. Total extension cost was 22,000. This project was finished in 31 December 20X9. (ii) At 01 September 20Y0, the air condition system was partly damaged due to a fire accident and was repaired at a cost of 5,000. However, its remaining estimated life was shortened to 4,000 hours. Records about air condition operating hours: - Accumulated operating hours to 31 August 20Y0: 12,000 hours - Operating hours from 01 January to 31 August 20Y0: 2,000 hours - Operating hours from 01 September to 31 December 20Y0: 250 hours. (iii) Annual maintenance cost for elevator incurred in 20Y0: 2,000. Required: 1. Show your solutions of PPE recognition and measurement at 01 January 20X7 with explanation? 2. Show your accounting treatments with costs incurred in those events given in the case with explanation? 3. Calculate the charges to P/L account in respect of the building and its parts for the year ended 31 December 2010.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Question 4:
Rachel co. acquired an old 5-story building of 500,000 at cost and renovated it into a modern
office building. Renovation costs and other details are as follows:
- Renovation costs (i.e. repainting, floor replacing, windows/doors remodeling, ...): 20,000
- An elevator installed for the first time: 40,000
- New modern air condition system: 15,000.
The office building was ready for intended use at 01 January 20X7 which being depreciated
over 25 years by straight line basis. The elevator has 10 years of estimated life and that of air
condition system is 20,000 operating hours. No residual values are attributed to any of the
component parts.
There were several events as following:
(i) In 20X9, Rachel started to extend a new floor at the top of the building for meeting rooms.
Total extension cost was 22,000. This project was finished in 31 December 20X9.
(ii) At 01 September 20Y0, the air condition system was partly damaged due to a fire accident
and was repaired at a cost of 5,000. However, its remaining estimated life was shortened to
4,000 hours.
Records about air condition operating hours:
- Accumulated operating hours to 31 August 20Y0: 12,000 hours
- Operating hours from 01 January to 31 August 20Y0: 2,000 hours
- Operating hours from 01 September to 31 December 20Y0: 250 hours.
(iii) Annual maintenance cost for elevator incurred in 20Y0: 2,000.
Required:
1. Show your solutions of PPE recognition and measurement at 01 January 20X7 with
explanation?
2. Show your accounting treatments with costs incurred in those events given in the case with
explanation?
3. Calculate the charges to P/L account in respect of the building and its parts for the year ended
31 December 2010.
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