Chapter – Investment Property, Other Non-current Financial Assets & Non-current Assets Held for Sale CHAPTER INVESTMENT PROPERTY, OTHER NONCURRENT FINANCIAL ASSETS AND NONCURRENT ASSETS HELD FOR SALE PROBLEMS 8-1 (Sebastian Corporation) a Purchase price P 8,600,000 Commission to real estate agent 430,000 Costs of clearing the land (net of timber and gravel recovered aounting to P65,000) 70,000 Total cost P 9,100,000 b 4,000,000 4,800,000 Down payment P Market value of shares issued (20,000 x 240) Present value of non-interest bearing note issued (2,000,000 x 2.4869) Total cost of land and building P13,773,800 9,641,660 8-2 Cost allocated to land (30% x 13,773,800) Cost allocated to building (70% x 13,773,800) (Precious Realty Corporation) 1/2/09 Buildings Accumulated Depreciation – Building Held as Investment Property Buildings Held as Investment Property Accumulated Depreciation Buildings 12/31/0 8.3 Depreciation Expense – Buildings Accumulated Depreciation Buildings Raymond Company Building Construction Fund Cash Cash Building Expansion Fund Securities Building Expansion Fund Securities Building Expansion Fund Securities Interest Receivable – Building Expansion Fund Building Expansion Fund Cash Building Expansion Fund Cash Dividend Income 61 4,973,800 P 4,132,140 P 8,200,000 4,200,000 8,200,00 4,200,00 200,000 200,000 Chapter – Investment Property, Other Non-current Financial Assets & Non-current Assets Held for Sale Building Expansion Fund Expenses Building Expansion Fund Cash Building Expansion Fund Cash Interest Receivable – Building Expansion Fund Interest Income Building Expansion Fund Securities Building Expansion Fund Cash Building Expansion Fund Cash Building Expansion Fund Securities Gain on Sale of Building Expansion Fund Securities Building Expansion Fund Cash Dividend Income 10 Building Expansion Fund Cash Building Expansion Fund Securities Gain on Sale of Building Expansion Fund Securities 11 Buildings Building Expansion Fund Cash 12 Cash Building Expansion Fund Cash 8.4 Cordero Corporation a Required Semiannual Deposit = P15,000,000/ PV of annuity of discounted at 4% for 20 periods = P15,000,000 / 13.5903 = P1,103,728 b 1/2/08 Bond Sinking Fund Cash Cash 1,103,728 1,103,728 6/30/08 Bond Sinking Fund Cash 1,147,877 Cash Interest Income 1,103,728 44,149 12/31/08 Bond Sinking Fund Cash Cash Interest Income 4% ( 1,103,728 + 1,147,877) = 90,064 8.5 1,193,792 1,103,728 90,064 Dorina Company a Entries for 2007 through 2011 7/01/06 120,000 Prepaid Life Insurance Cash 120,000 12/31/06 Life Insurance Expense 60,000 62 Chapter – Investment Property, Other Non-current Financial Assets & Non-current Assets Held for Sale Prepaid Life Insurance 60,000 36,000 06/30/07 Prepaid Life Insurance Cash 120,000 120,000 12/31/07 Life Insurance Expense Prepaid Life Insurance 120,000 120,000 06/30/08 Prepaid Life Insurance Cash 120,000 120,000 12/31/08 Life Insurance Expense Prepaid Life Insurance 120,000 120,000 06/30/09 Prepaid Life Insurance Cash 120,000 120,000 12/31/09 Life Insurance Expense Prepaid Life Insurance 120,000 120,000 12/31/09 Cash Surrender Value Life Insurance Expense 36,000 06/30/10 Prepaid Life Insurance Cash 120,000 120,000 12/31/10 Life Insurance Expense Prepaid Life Insurance 120,000 120,000 Cash Surrender Value 13,000 Life Insurance Expense 13,000 3/31/11 Life Insurance Expense Prepaid Life Insurance 30,000 4,000,000 30,000 49,000 Receivable from Insurance Company Prepaid Life Insurance Cash Surrender Value 63 30,000 Chapter – Investment Property, Other Non-current Financial Assets & Non-current Assets Held for Sale Gain on Insurance Settlement 3,921,000 b If the president or his heirs were the beneficiaries of the policy, the premiums paid shall be charged to employees benefit expense and no cash surrender value will be set up by the company 8.6 Solidbank a P10,000,000 x 0.3220 = P3,220,000 b Interest Income in 2008 = 12% x P3,220,000 = P386,400 c 1/1/08 Advances to Officers 3,220,000 Prepaid Compensation Expense 6,780,000 Cash 10,000,000 12/31/08 Advances to Officers 386,400 Interest Revenue 386,400 386,400 Compensation Expense Prepaid Compensation Expense 386,400 12/31/09 Advances to Officers 432,768 Interest Revenue 432,768 (3,220,000 + 386,400) x 12% = 432,768 d 8.7 Patriarch, Inc a 12/31/08 Machinery Group Held For Sale Accumulated Depreciation – Machinery Impairment Loss – Machinery Machinery 2,200,000 Machinery Tools 380,000 Machinery Parts 220,000 b 8.8 Amortized Cost at December 31, 2009 = 3220,000 + 386,400 + 432,768 = 4,039,168 07/17/09 Cash (1,520,000 – 60,000) Machinery Group Held For Sale 1,400,000 Gain on Sale of Machinery 60,000 (Invecargill Ltd.) a 08/01/08 Impairment Loss – Equipment Loss from Decline in NRV of Inventory Equipment 15,000 Inventory 5,000 64 1,400,000 1,200,000 200,000 1,460,000 15,000 5,000 Chapter – Investment Property, Other Non-current Financial Assets & Non-current Assets Held for Sale b 220,000 145,000 75,000 20,000 c MC1 MC2 MC3 MC4 MC5 MC6 MC7 MC8 MC9 MC10 MC11 MC12 MC13 MC14 MC15 MC16 MC17 MC18 MC19 MC20 Assets Held for Sale Accumulated Depreciation Impairment Loss Plant 350,000 80,000 30,000 Equipment Inventory Goodwill 02/01/09 Cash (380,000 – 30,000) Assets Held For Sale 350,000 350,000 MULTIPLE CHOICE C C A B B C C C B A B A B D B A A 110,000 – (115,000 – 80,000) D 9,000,000 – 1,500,000 = 7,500,000 which is lower than carrying amount of P8,000,000 D (9,200,000 – 1,300,000) – 7,500,000 = 400,000 C 2,000,000 x 0.7972 = 1,594,400 1,594,400 x 12% x 6/12 = 95,664; 1,594,400 + 95,664 = 1,690,064 65 ...Chapter – Investment Property, Other Non-current Financial Assets & Non-current Assets Held for Sale Building Expansion Fund Expenses Building Expansion Fund Cash... Life Insurance Expense 60,000 62 Chapter – Investment Property, Other Non-current Financial Assets & Non-current Assets Held for Sale Prepaid Life Insurance 60,000 36,000 06/30/07 Prepaid Life Insurance... Cash Surrender Value 63 30,000 Chapter – Investment Property, Other Non-current Financial Assets & Non-current Assets Held for Sale Gain on Insurance Settlement 3,921,000 b If the president or