You have traced the supporting documents for the disposals of PPE and ascertain whether they are properly authorized. You also traced the corresponding accounts to the subsidiary ledgers and general ledgers.

 

1. On August 2, 2021, the Toyota Wigo were sold for P200,000.
 

2. The Company's warehouse was destroyed by fire last March 31, 2021. The Company was able to receive insurance claim of P5,000,000 from Malayan Insurance.

 

Required: Evaluate the computation of gain or loss on the disposals of PPE and the proper proposed adjusting journal entries (PAJE).

 

2. You have documented during your Risk Assessment Procedures that Pharsa Company's depreciation policy includes recognition of full month depreciation on the month of acquisition of asset. The depreciation policy also provides that all its PPE except for land shall be depreciated on a straight-line basis without any residual value. The useful life of Pharsa Company's PPE are as follows:

Building 25 years

Machinery and equipment 5 years

Transportation equipment 10 years

Office fumiture and fixtures 5 years
 

Required: Recompute the balance of depreciation expense and accumulated depreciation expense and determine appropriate PAJE.

Answer rating: 100% (QA)

Evaluation of Computation of Gain or Loss on Disposals of PPE Toyota Wigo Proceeds from the sale of ... View the full answer