The draft balance sheet of Four Corporation as of December 31, 2020 reported the net property, plant and equipment at P6,270,000. Details of the amount follow: Land at cost Building at cost Less accumulated depreciation at 12/31/19 Plant at cost Less accumulated depreciation at 12/31/19 (3.130.00o) 2.070.000 P1,000,000 P4,000,000 ( 800.000) 3,200,000 5,200,000 P6.270.000 The following matters are relevant (a) The company policy for all depreciation is that a full year's charge is made in the year of acquisition or completion and none in the year of disposal. (b) Included in the sales revenue is P300,000 being the sales proceeds of an item of plant that was sold on June 30, 2020. The plant had originally cost P900,000 and had been depreciated by P630,000 as of December 31, 2019. Other than recording the proceeds in sales and cash, no other accounting entries for the disposal of the plant have been made. All plant is depreciated at 25% per annum on the reducing balance basis. (c) On September 30, 2020, the company completed the construction of a new warehouse. The construction was achieved using the company's own resources as follows: Purchased materials Direct labor P150,000 800,000 65,000 20,000 Supervision Design and planning costs Included in the above figures are P10,000 for materials and P25,000 for labor costs that were effectively lost due to the foundations being too close to a neighboring property. All the above costs are included in cost of sales. The building was brought into immediate use upon completion and has an estimated useful life of 20 years (straight-line depreciation).
The draft balance sheet of Four Corporation as of December 31, 2020 reported the net property, plant and equipment at P6,270,000. Details of the amount follow: Land at cost Building at cost Less accumulated depreciation at 12/31/19 Plant at cost Less accumulated depreciation at 12/31/19 (3.130.00o) 2.070.000 P1,000,000 P4,000,000 ( 800.000) 3,200,000 5,200,000 P6.270.000 The following matters are relevant (a) The company policy for all depreciation is that a full year's charge is made in the year of acquisition or completion and none in the year of disposal. (b) Included in the sales revenue is P300,000 being the sales proceeds of an item of plant that was sold on June 30, 2020. The plant had originally cost P900,000 and had been depreciated by P630,000 as of December 31, 2019. Other than recording the proceeds in sales and cash, no other accounting entries for the disposal of the plant have been made. All plant is depreciated at 25% per annum on the reducing balance basis. (c) On September 30, 2020, the company completed the construction of a new warehouse. The construction was achieved using the company's own resources as follows: Purchased materials Direct labor P150,000 800,000 65,000 20,000 Supervision Design and planning costs Included in the above figures are P10,000 for materials and P25,000 for labor costs that were effectively lost due to the foundations being too close to a neighboring property. All the above costs are included in cost of sales. The building was brought into immediate use upon completion and has an estimated useful life of 20 years (straight-line depreciation).
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
The revaluation surplus as of December 31, 2020 is
a. P1,720,000 c. P1,800,000
b. P1,710,000 d. P 960,000
Transcribed Image Text:The draft balance sheet of Four Corporation as of December 31, 2020 reported the net property, plant
and equipment at P6,270,000. Details of the amount follow:
Land at cost
Building at cost
Less accumulated
depreciation at 12/31/19
Plant at cost
Less accumulated
depreciation at 12/31/19
P1,000,000
P4,000,000
800.000)
5,200,000
3,200,000
(3.130.000)
2.070.000
P6.270.000
The following matters are relevant
(a) The company policy for all depreciation is that a full year's charge is made in the year of acquisition
or completion and none in the year of disposal.
(b) Included in the sales revenue is P300,000 being the sales proceeds of an item of plant that was sold
on June 30, 2020. The plant had originally cost P900,000 and had been depreciated by P630,000
as of December 31, 2019. Other than recording the proceeds in sales and cash, no otheraccounting
entries for the disposal of the plant have been made. All plant is depreciated at 25% per annum on
the reducing balance basis.
(c) On September 30, 2020, the company completed the construction of a new warehouse. The
construction was achieved using the company's own resources as follows:
Purchased materials
Direct labor
Supervision
Design and planning costs
P150,000
800,000
65,000
20,000
Included in the above figures are P10,000 for materials and P25,000 for labor costs that were
effectively lost due to the foundations being too close to a neighboring property. All the above costs
are included in cost of sales. The building was brought into immediate use upon completion and
has an estimated useful life of 20 years (straight-line depreciation).
Transcribed Image Text:(d) At the beginning of the current year, the company had an open market basis valuation of its
properties (excluding the newly constructed warehouse). Land was valued at P1.2 million and the
property at P4.8 million. The directors wish these values to be incorporated into the financial
statements. The properties had an estimated remaining life of 20 years at the date of the valuation
(straight-line depreciation is used). The company makes a transfer to retained eamings in respect
of the excess depreciation on revalued assets.
(e) Depreciation for the year 2020 has not yet been accounted for the in the draft financial statements.
Based on the above and the result of your audit, answer the following:
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 2 steps with 2 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education