Information pertaining to Towns Corporation's property, plant and equipment for 2020 is presented below: Account Balances at
Question:
Information pertaining to Towns Corporation's property, plant and equipment for 2020 is presented
below:
Account Balances at January 1, 2020
Debit Credit
Land P1,500,000
Building 2,400,000
Accumulated depreciation P642,974
Machinery and equipment 1,800,000
Accumulated depreciation 648,000
Automotive equipment 1,150,000
Accumulated depreciation 887,143
Depreciation methods used and useful life
Building - 150% declining balance; 20 years
Machinery and equipment - Straight-line; 10 years
Automotive equipment - Sum-of-year's-digits; 6 years
The salvage value of the assets is estimated at 10% of the assets cost. Depreciation is computed to
the nearest month. All assets were acquired at the beginning of 2016.
Transactions during 2020 and other information:
On January 1, Towns Corporation purchased a new automotive equipment for P800,000 cash and
trade-in of an old automotive equipment with an original cost of P600,000. The new car has a cash
price of P950,000; market value of trade-in is not known.
On June 30, a machine with an original cost of P250,000, was totally destroyed by fire. Town
Corporation recovered P50,000 from its insurance company.
On July 1, a replacement machinery and equipment were acquired in exchange of 8,000 shares of the
company's own ordinary shares (P50 par value). The new machinery and equipment had a cash price
of P480,000. Additional costs of P5,000 for freight and P25,000 for installation were incurred.
Requirements:
1. What is the gain or loss on the trade-in on January 1?
2. How much impairment loss should be recognized from the machinery on June 30?
3. What is the correct depreciation expense for 2020 for the following PPE items:
a. Building
b. Machinery and equipment
c. Automotive equipment
4. What is the correct carrying values as of December 31, 2020 for the following PPE items:
a. Building
b. Machinery and equipment
c. Automotive equipment
Expert Answer:
Lets break down each requirement step by step 1 Gain or Loss on TradeIn on January 1 Old automotive equipments original cost P600000 Tradein value P95... View the full answer
