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PROPERTY, PLANT AND EQUIPMENT
28. On January 1, 2019, Coco Company acquired a factory equipment at

a cost of P300,000. The equipment is being depreciated using the
straight-line method over its projected useful life of 10 years. On
December 31, 2020, a determination was made that the asset's
recoverable amount was only P192,000. On December 31, 2021,
the asset's recoverable amount was determined to be P222,000 and
management believes that the impairment loss previously recognized
should be reversed.
Required:
a. How much impairment loss should be recognized on December 31,
2020?
b. What is the asset's carrying value on December 31, 2021?
c. How much impairment recovery should be reported in 2021?
29. On January 1, 2019, an item of equipment with cost of P4,000,000

and accumulated depreciation of P1,600,000 was revalued to have a
fair market value of P3,600,000 and a remaining useful life of 6 years.
The company adopts the policy of reporting this item of property,
plant and equipment at revalued amount less any subsequent
accumulated depreciation and subsequent impairment losses.
The company restates its accumulated depreciation proportionately

with the change in the gross carrying amount of the asset and
transfers a portion of the surplus as the asset is being used by the
entity. On January 1, 2021, a second revaluation indicates that the
equipment had a fair value of P2,000,000.
Required:
Prepare the journal entries to record
a. the revaluation on January 1, 2019;
b. adjusting entries at December 31, 2019 and at December 31, 2020;
c. the revaluation on January 1, 2021; and
d. adjusting entries at December 31, 2021.
30. On January 1, 2019, Samsung Company purchased a machinery

incurring a total cost of P3,600,000. This unit of equipment belongs
to a class carried by Samsung using the revaluation model. Any
resulting revaluation surplus is periodically transferred to retained
earnings as the surplus is realized. Revaluation is recorded
maintaining the proportionate relationship between the asset account
and accumulated depreciation.
Depreciation is consistently provided on the equipment based on the

original estimated useful life of 10 years. The company revalues this
unit every two years. The results of the revaluation are as follows:
Revalued
Date of revaluation amount
December 31, 2020 P3,120,000
December 31, 2022 2,010,000
December 31, 2024 1,800,000
Required:
Give all entries relating to this equipment from January 1, 2019
through December 31, 2025.
31. Allied Company sought to increase reserves of a special mineral

resource. During 2019, the company purchased a piece of property
that was expected to retain some value after removal of the mineral
resources was complete. Company records reveal the following:
In the year 2019:

Purchase price of property P4,450,000
Estimated supply of mineral resource 3,500,000 tons
Estimated property value after removal of
mineral resource P 650,000
Total resource removal this year 0 tons
In the year 2020:
Capitalized development costs P 750,000
Total resource removal this year 0 tons
In the year 2021:
Total resource removal this year 550,000 tons
In the year 2022:
Estimated total resources to be recovered
in future years (based on new discoveries) 3,660,000 tons
Additional capitalized development costs P 961,000
Total resource removal this year 700,000 tons
Required:
What are the amounts of depletion expense for 2020 and 2021?
ANSWERS
28 Coco Company
a. Cost 300,000
Less : Accumulated Depreciation 12/31
(300,000/10) X 2 60,000
Carrying Amount before Impairment 240,000
Recoverable Amount 192,000
Impairment Loss 48,000
b. Carrying Value after Impairment 192,000

Less: 2021 Depreciation
(192,00 / 8) 24,000
Asset's Carrying Value on 12/31/21 168,000
c. Carrying amount before recovery of impairment 168,000

Recoverable Amount 222,000
Increase in Value 54,000
Limit on Recovery
Previous Impairment 48,000
Recovered in 2021
(30,000 - 24,000) 6,000
Impairment Recovery Reported 12/31/21 42,000
29 The Company
a. 43,466
Equipment 2,000,000
Revaluation Surplus
Accumulated Depreciation
3,600,000-2,400,000 = 1,200,000 (50% Inc.)
50% x 4,000,000 = 2,000,000
50% x 1,600,000 = 800,000
b. 12/31/2019
Depreciation Expense 600,000
Accumulated Depreciation-Equipment
3,600,000 ÷ 6 yrs = 600,000
Revaluation Surplus 200,000
Retained Earnings
(1.2M/6)
c. Accumulated Depreciation 600,000

Revaluation surplus 400,000
Equipment
Cost
Equipment 6,000,000
Accumulated depreciation 3,600,000
3,600,000
d. Depreciation Expense 500,000

(2,000,000/4)

Retained Earnings
(1,200,000-((200,000*2)+400,000))/4
30 Samsung Company
Jan. 2019 Machinery 3,600,000

Cash
Dec. 2019 Depreciation expense 360,000


Machinery 300,000
Accumulatd depreciation
Revaluation Surplus
Cost
Machinery 3,600,000
Accumulated depreciation 720,000
2,880,000


Retained Earnings


Retained Earnings
Accumulated Depreciation 220,000

Revaluation surplus 180,000
Revaluation loss 150,000
Machinery
Cost
Machinery 3,900,000
2,340,000


Machinery 1,150,000
Accumulatd depreciation
Recovery from previous loss
Revaluation Surplus
Cost
Machinery 3,350,000
1,340,000


Retained Earnings
31 Allied Company
There is no resource removal for the year 2020. Hence, no depletion expense.
Purchase of property 4,450,000

Development cost, 2020 750,000
Depletable cost 5,200,000
Divide by: estimated supply of mineral resource 3,500,000
depletion rate per ton 1
Multiply by: resource removal, 2021 550,000
Depletion expense, 2021 817,143
Purchase price 4,450,000

Capitalized development cost 750,000
Residual value -650,000
Depletable cost 4,550,000
Estimated recoverable units 3,500,000
Depletion per ton 1
Removed resources 550,000
Depletion expense, 2021 715,000
1,200,000
800,000
600,000
200,000
1,000,000
Replacement cost Appreciation

5,000,000 -1,000,000
3,000,000 -600,000
2,000,000 -400,000
500,000
100,000
3,600,000
360,000
360,000
60,000
240,000
Replacement cost Appreciation
3,900,000 300,000
780,000 60,000
3,120,000 240,000
390,000
30,000
390,000
30,000
Decrease
-550,000
550,000 -220,000
-330,000
Replacement cost
3,350,000
1,340,000
2,010,000
Revaluation Surplus limit:
Carrying value (no revaluation loss)
335,000 Revalued amount
revaluation surplus limit
335,000
690,000 Appreciation
100,000 1,150,000
360,000 690,000
460,000
Replacement cost
4,500,000
2,700,000
1,800,000
450,000
90,000
1,440,000
1,800,000
360,000

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PROPERTY, PLANT AND EQUIPMENT

28. On January 1, 2019, Coco Company acquired a factory equipment at

29. On January 1, 2019, an item of equipment with cost of P4,000,000

The company restates its accumulated depreciation proportionately

30. On January 1, 2019, Samsung Company purchased a machinery

Depreciation is consistently provided on the equipment based on the

31. Allied Company sought to increase reserves of a special mineral

In the year 2019:

b. Carrying Value after Impairment 192,000

c. Carrying amount before recovery of impairment 168,000

c. Accumulated Depreciation 600,000

d. Depreciation Expense 500,000

Revaluation Surplus 100,000

Jan. 2019 Machinery 3,600,000

Dec. 2019 Depreciation expense 360,000

Dec. 2020 Depreciation expense 360,000

Dec. 2021 Depreciation expense 390,000

Revaluation Surplus 30,000

Dec. 2022 Depreciation expense 390,000

Revaluation Surplus 30,000

Accumulated Depreciation 220,000

Dec. 2023 Depreciation expense 335,000

Dec. 2024 Depreciation expense 335,000

Dec. 2025 Depreciation expense 450,000

Revaluation Surplus 90,000

Purchase of property 4,450,000

Purchase price 4,450,000

Replacement cost Appreciation

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