Property, Plant & Equipment - P1

Question 1

Various Ways of Acquiring PPE:
9

Answer 1

1. Cash Basis
2. On Account (credit) - ALWAYS NET OF DISCOUNT!
3. Installment (deferred) basis
4. Issuance of own Shares
5. Issuance of bonds
6. Exchange
7. Trade In
8. Donation
9. Construction

Question 2

PPE
How to treat sale of samples generated by testing (of equipment)?
Please provide JE

Answer 2

Deduction to Equipment:
Dr. Cash
Cr. Eqpmt.

Question 3

Included to the cost of PPE?
1. Refundable Tax
2. Non-refundable Tax

Answer 3

1. Refundable Tax - No
2. Non-refundable Tax (Irrecoverable Taxes) - Yes

Input Vat

Question 4

Explain Discount on Acquisition of PPE on account.

Answer 4

Discount should be deducted whether taken or not.

If not taken, charge to Purchase discount lost

Question 5

Acquisistion Cost of PPE thru Installment Basis?

Answer 5

1. Cash Price Equivalent (given to sa problem pag meron)
2. If not available, PV of future cashflows

Question 6

How to allocate cost for
Lump sum or Basket Purchase?

Answer 6

Just allocate cost thru FV (pro rata)

Question 7

PPE
Acquisition thru Exchange
How determine of with commercial substance or not?
Explain further the measurement order of priority (With or Wout Comm Substance?

Answer 7

Has comm substance when the cash flows of the assets received differ significantly from the cash flows of the asset given

With Comm Subs:
1. FV of asset given up (plus cash paid or minus cash received)
2. FV of Asset received
3. CA of asset given up (plus cash paid minus cash received)

Wout Comm Substance:
CA of asset given up (plus cash paid minus cash received)

Notes:
No gain or loss arises if the asset received is measured at CA of the asset given up

Gain pr Loss on exchange is balancing figure OR, FV less CA of asset given up

Question 8

PPE
Acquisition thru Trade-In
Measurement

Answer 8

1. FV of the asset given plus Cash Payment
2. FV of the asset received (equal to Trade in Value of asset given plus Cash Payment)

Question 9

PPE
Acquisition thru Issuance of Own Shares
Measurement

Answer 9

1. FV of Asset RECEIVED
2. FV of shares issued
3. Par value of shares issued

Basic lang to. Basta diff sa share premium

Question 10

PPE
Acquisition thru Issuance of Bonds
Measurement

Answer 10

1. FV of Asset RECEIVED
2. FV of bonds payable issued

Question 11

PPE
Acquisition by Donation
Measurement?
What acct is to be credited?
Any cost attributable to the receipt of donation and transfer of ownership is charge to?

Answer 11

FV of asset received.
Credited to:
Income - if the donor is UNRELATED party

Donated Capital - if the donor is an owner or related party

Note:
1. Any cost attributable to the receipt of donation and transfer of ownership is charge to Income pr Donated Capital

2.The Donated Capital is presented under Share Premium or Additional Paid in Capital

Question 12

PPE thru Construction
Measurement

Answer 12

Costs Includes:
1. Direct Materials
2. Direct Labor
3. Overhead Specifically Traceable to the Construction

Question 13

Explain Cost of Demolition?

Answer 13

Shall be capitalized as Cost of the new Building

Any proceeds from sale of Salvaged materials are deducted from cost pf demolition!

Note: Only Demolition costs is Capitalizable. The cost of demolished building shall be recognized as loss.

Question 14

In Lump sum price (basket acquisition)

If the building is Unsuable, the acquisition cost is allocated to the Land only!

Answer 14

Yes

Question 15

PPE
If the overhaul resulted in significatnt increase in production, captilizable or not?

Answer 15

Capitalizable