4th Assessment

Problem 1
Editha Company has the following information on January 1, 2010 related to its property, plant and
equipment:

Land 30,000,000
Building 300,000,000
Accumulated depreciation building (37,500,000)
Machinery (4 machines) 400,000,000
Accumulated depreciation machinery (100,000,000)
Carrying amount 592,500,000

There were no additions or disposals during 2010. Depreciation is computed using straight line over 20
years for building and 10 years for machinery. On December 31, 2010, all of the property, plant and
equipment were revalued as follows:
Replacement Cost Sound Value
Land 40,000,000 40,000,000
Building 500,000,000 425,000,000
Machinery 650,000,000 455,000,000

On June 30, 2012, building was revalued at P200,000,000, its fair market value at that time. One of the
four machines were sold on December 31, 2012 at P125,000,000.

On December 31, 2013, building was revalued at P300,000,000, the fair value of the asset at that time.

Per Book FMV Appreciation

Land 30,000,000 40,000,000 10,000,000

Bldg 300M 515,151,515

(52.5M) 90,151,515
82.5% (16.5yrs) 247.5M 425,000,000 177,500,000

Machine 400M 700M

(140M) (245M)
65% (6.5 yrs) 260M 455M 195,000,000
Total Revaluation Surplus 12/31/2010 382,500,000
Amortization:
Bldg - 177,500,000 / 16.5 yrs 10,757,576
Machine 195,000,000 / 6.5 yrs 30,000,000
Revaluation Surplus 12/31/2011 341,742,424

Depreciation 2011
Bldg - 425,000,000 / 16.5 yrs = 25,757,576
Machine - 455,000,000 / 6.5 yrs = 70,000,000
Total = 95,757,576

Revaluation Surplus 12/31/2011 341,742,424

Amortization:
Bldg. 177,500,000 / 16.5 yrs / 6/12 5,378,788
Absorption of RS due to decrease in value 161,363,636
Machine 195,000,000 / 6.5 yrs 30,000,000
Bal. of RS from Sold Machine 33,750,000
Revaluation Surplus 12/31/2012 111,250,000

Cash 125,000,000
Accum. Depreciation* 96,250,000
Machinery 175,000,000
Gain on sale 46,250,000

Revaluation Surplus 33,750,000

Retained Earnings 33,750,000

700M / 4 = 175M RS 195M

(385M) / 4 = 96,25M Amor. - 60M
385M Bal. - 135M / 4 = 33,750,000

6/30/2012
Per Book FMV Decrease
515,151,515 266,666,667 248,484,848
(128,787,879) 66,666,667 62,121,212
75% 386,363,636 200,000,000 186,363,636
161,363,636 RS Balance
25,000,000 Impairment loss
Accum. Depreciation 62,121,212
Impairment loss 25,000,000
Revaluation Surplus 161,363,636
Building 248,484,848

RS 6/30/2012
Bldg - 177,500,000
Amort 2011 - 10,757,576
Amort 2012 - 5,378,788
RS Balance - 161,363,636

12/31/2013
Per Book FMV Increase
266,666,667 444,444,444 177,777,777
86,666,667 57,777,777
67.5% 180,000,000 300,000,000 120,000,000
25,000,000 Gain on Reversal of Impairment
95,000,000 Revaluation Surplus
Building 177,777,777
Accum. Depreciation 57,777,777
Gain on reversal 25,000,000
Revaluation Surplus 95,000,000
Questions:

1. What is the revaluation surplus on December 31, 2011?

a. 322,500,000 b. 341,742,424 c. 345,000,000 d. 327,500,000

2. What is the total depreciation for 2011?

a. 95,575,576 b. 66,750,000 c. 72,500,000 d. 90,000,000

3. What is the revaluation surplus on December 31, 2012?

a. 244,418,788 b. 111,250,000 c. 337,500,000 d. 327,500,000

4. What is the impairment loss on December 31, 2012, if any?

a. 25,000,000 b. 100,000,000 c. 60,000,000 d. 0

5. What is the revaluation surplus on December 31, 2011?

a. 322,500,000 b. 341,742,424 c. 141,875,000 d. 96,250,000

6. Gain on sale on December 31, 2012 is:

a. 71,250,000 b. 46,250,000 c. (13,750,000) d. 60,000,000

7. What is the gain on reversal on impairment of the building at December 31, 2013, if any?
25,000,000

8. Prepare entry to record the June 30, 2012 revaluation of building.

Accum. Depreciation 62,121,212
Impairment loss 25,000,000
Revaluation Surplus 161,363,636
Building 248,484,848

9. Prepare entry to record the December 31, 2013 revaluation of building.

Building 177,777,777
Accum. Depreciation 57,777,777
Gain on reversal 25,000,000
Revaluation Surplus 95,000,000

Problem 3
The Jade Corporation had acquired interest in a promising local company, the Ian Cedric Company. During
your audit of the companys accounts for the year 2015, which was a first audit, you obtained the
following:
Investment in Ian Cedric Company

1/2/09 30,000 sh. P1,050,000 7/15/15 50,000 sh. P2,000,000

7/2/10 90,000 sh. 5,400,000
3/2/15 30,000 sh. 2,100,000

Investment in Ricardo Company

 8//10/15 P10,000

Dividend Income

2/2/15 P120,000
4/1/15 150,000
8/10/15 10,000
12/20/15 100,000

The investments are classified at FMVTOCI. Prior to 2015, the fair value of the investment in Ian Cedric
Company cannot be reliably measured.

The transactions pertaining to the foregoing for 2015 were as follows:

Jan. 2 Received cash dividend (declared on December 1) of P1 per share.

Mar. 2 Bought 30,000 shares at P70 per share.

Apr. 1 Received cash dividend (declared on March 1 to shareholders of record as of

March 10) of P1 per share.

July 15 Sold 50,000 shares at P40 per share.

Aug. 10 Received an extra dividend in shares of one share of Ricardo Company for every
ten shares of Ian Cedric Company. The share dividend had a market value of P3 per
share and its carrying amount on the ledger of Ian Cedric Company was P1 per share.

Dec. 20 Received cash dividend of P1 per share, declared December 1, out of Ian Cedric
Companys Reserve for Depletion.

29 Sold 10,000 Ian Cedric Company shares at P70. Cash was received on January 5, 2016

Market prices per share of the securities as of December 31, 2015 are as follows:

Ian Cedric Company P70.00

Ricardo Company 2.50

Ian Cedric Ricardo

30,000 1,050,000 1,050,000 10,000 30,000
90,000 5,400,000 1,200,000 - 70,000 x 2.50
30,000 2,070,000 30,000 25,000
(50,000) (2,250,000) 30,000 1,050,000
( 100,000) LD 20,000 1,200,000
(10,000) ( 590,000) (4,130,000 x 10/70)
90,000 5,580,000
X 70.00
6,300,000

SP 2,000,000
CV 2,250,000
Loss 250,000

Dividend Income Marc 1 declaration 120,000 x P1 = 120,000

Property dividend = 30,000
Total dividend income = 150,000

SP 700,000
CV 590,000
Gain 110,000

FMV - 6,325,000
Cost - 5,610,000
UHG - 715,000

Questions:
Based on the above and the result of your audit, answer the following: (Use FIFO cost flow assumption)

10. The loss on sale of 50,000 Ian Cedric Company shares on July 15, 2015 is
a. P250,000 b. P850,000 c. P1,300,000 d. P 0

11. The gain on sale of 10,000 Ian Cedric Company shares on December 29, 2015
a. P130,000 b. P100,000 c. P110,000 d. P 0

12. The dividend income for the year ended December 31, 2015 is
a. P250,000 b. P150,000 c. P200,000 d. P230,000

13. The carrying amount of investment as of December 31, 2015 is

a. P7,025,000 b. P6,325,000 c. P6,300,000 d. P6,330,000

14. The net unrealized gain or loss to be recognized in equity as of December 31, 2015 is
a. P715,000 b. P625,000 c. P685,000 d. P595,000