Audit of Property, Plant and Equipment
Audit of Property, Plant and Equipment
AND EQUIPMENT
PROBLEM 1
1. Cost of land
a. P2,980,000 b. P3,270,000 c. P3,185,000 d. P3,205,000
..\ANSWER\PPE\P1-Q1.doc
2. Cost of buildings
a. P10,810,000 b. P10,895,000
c. P10,875,000 d. P11,110,000
..\ANSWER\PPE\P1-Q2.doc
May 1 The company contracted for parking lots and waiting sheds at a
cost P360,000 and P76,800, respectively. The work was completed
and paid for on June 1.
Dec. 31 The business was closed to permit taking the year-end inventory.
During this time, required redecorating and repairs were
completed at a cost of P60,000.
QUESTIONS:
Based on the above and the result of your audit, determine the cost of
the following:
1. Land
a. P940,000 b. P1,005,200 c. P976,000 d. P1,052,800
..\ANSWER\PPE\P2-Q1.doc
2. Buildings
a. P4,645,600 b. P5,005,600 c. P4,762,400 d. P4,681,600
..\ANSWER\PPE\P2-Q2.doc
3. Machinery and Equipment
a. P360,000 b. P560,000 c. P576,615 d. P659,692
..\ANSWER\PPE\P2-Q3.doc
4. Land improvements
a. P360,000 b. P76,800 c. P436,800 d. P 0
..\ANSWER\PPE\P2-Q4.doc
Cost Accumulated
Depreciation
Machinery and equipment P1,380,000 P367,500
Automobiles and trucks 210,000 114,326
Leasehold improvements 432,000 108,000
Depreciation policy:
a. Depreciation methods and useful lives:
• Machinery and equipment – straight line ; 10 years
• Automobiles and trucks – 150% declining balance ; 5 years, all were
acquired after 2005
• Leasehold improvements – straight line
b. Depreciation is computed to the nearest month.
c. Salvage values are immaterial except for automobiles and trucks
which have estimated salvage values equal to 15% of cost
Additional information:
QUESTIONS:
Based on the above and the result of your audit, answer the following:
4. The total depreciation expense for the year ended December 31, 2010
is
a. P185,402 b. P245,065 c. P138,000 d. P221,402
..\ANSWER\PPE\P3-Q4.doc
Building used in mine operations cost P800,000 and have estimate life
of fifteen years with no residual value. Mine machinery costs
P1,600,000 with an estimated residual value P320,000 after its
physical life of 4 years.
Following is the summary of the company’s operations for the first year
of operations.
Building P3,000,000
Accumulated (1,000,000) P2,000,000
Equipment 1,200,000
Accumulated depreciation ( 400,000) 800,000
The company has adopted the revaluation model for the valuation of
property and equipment. This has resulted in the recognition in prior
periods of an asset revaluation surplus for the building of P150,000. On
December 31, 2009, an independent valuer assessed the fair value of the
building to be P1,600,000 and the equipment to be P900,000.
The building and equipment had remaining useful lives of 25 years and 4
years, respectively, as of December 31, 2009.
Questions:
Based on the above and the result of your audit, determine the
following: (Ignore deferred tax consequence)
On March 31, 2010, the plant had not been sold but, due to a shortage
of this type of plant, there had been an increase in the fair value to
P770,000. On June 30, 2010, San Isidro sold the plant for P785,000,
incurring P25,000 selling costs.
Questions:
Based on the above and the result of your audit, answer the
following:
..\ANSWER\PPE\P7-Q3.doc