ExtAud 3 Assignment 2 With Answers
Uploaded by
Alyana LinogExtAud 3 Assignment 2 With Answers
Uploaded by
Alyana LinogProblem 1
Alisel Farm, Inc. began its operations on January 1, 2024. Over the next year, the company purchased a parcel of land,
removed the existing building, and constructed a new factory. Equipment was acquired for the facility, and by August
2022, the plant was prepared to start operating. A grand opening took place on August 22, with Mayor Alice and
Mayor Liseldo inaugurating the factory, and the initial products were available for sale by August 27.
1. What is the cost of the equipment? 913,000
2. What is the cost of the building? 6,438,000
3. What is the cost of the land? 3,099,250
Problem 2
Cathy Company purchased a tooling machine in 2013 for P2,500,000. The machine was depreciated on the straight-
line method over an estimated useful life of twenty years with no residual value. At the beginning of 2018, when the
machine had been in use for 5 years, the entity paid P270,000 to overhaul the machine. As a result of this
improvement, the entity estimated that the useful life of the machine would extend an additional 3 years.
4. What should be the depreciation expense for the machine in 2018?
Original cost 2,500,000
Original useful life 20
Depreciation expense 125,000
Years used 5
Accumulated depreciation, 12/31/17 625,000
Original cost 2,500,000
Accumulated depreciation, 12/31/17 (625,000)
Carrying amount, 12/31/17 1,875,000
Carrying amount, 01/01/18 1,875,000
Improvement 270,000
Adjusted carrying amount, 01/01/18 2,145,000
New remaining useful life (20-5+3) 18
Depreciation expense for 2018 119,167
Problem 3
Cheryl Company has several cash generating units (CGUs). As of December 31, 2024, the demand for the products
produced by one of its CGUs substantially declined thus, the CGU was tested for impairment. The following were
made available for the said testing:
Carrying Amount - 12/31/2024
Office equipment 1,625,000
Factory equipment 1,750,000
Building 2,875,000
Goodwill 600,000
The expected annual net cash flow from the CGU are expected to be at P1,377,510 for its remaining 5-year useful life.
The fair value less cost to sell of the CGU was P5,250,000. Assume a prevailing rate of interest at 8%.
5. What is the impairment loss on the CGU?
Carrying amount 6,850,000
Recoverable amount (5,500,000)
Impairment loss 1,350,000
6. What is the carrying amount of the factory equipment after the impairment loss recognition?
Carrying Amount Allocation of IL
Office equipment 1,625,000 750,000 x 1625/6250 = 195,000
Factory equipment 1,750,000 750,000 x 1750/6250 = 210,000
Building 2,875,000 750,000 x 2875/6250 = 345,000
Goodwill 600,000 first priority 600,000
Factory equipment - CA 1,750,000
Factory equipment - IL (210,000)
CA after impairment 1,540,000
7. If the office equipment has a recoverable amount of P1,200,000 and the building has a recoverable value of
2,600,000, what is the carrying amount of the factory equipment after impairment loss?
Carrying Amount Recoverable Amount Allocation of IL
Office equipment 1,625,000 1,200,000 425,000
Factory equipment 1,750,000 ? 50,000
Building 2,875,000 2,600,000 275,000
Goodwill 600,000 - 600,000
Factory equipment - CA 1,750,000
Factory equipment - IL (50,000)
CA after impairment 1,700,000
Problem 4
Galicia Company purchased machinery on January 1, 2024 for P 8,000,000. The machinery had an estimated 10-year-
service life. Galicia’s policy for 10-year assets is to use the double declining balance method for the first 3 years of the
assets life and then switch to the straight-line depreciation method.
8. In its December 31, 2028 statement of financial position, what amount should Galicia report as accumulated
depreciation for the machinery?
