PPE

Question 1

Recognition Criteria of PPE
- probable and measurable (definition of assets)

Answer 1

Yes

Question 2

Initial Measurement → at cost
- Purchase Price
(1) import duties
(2) non-refundable tax
- DACS (to proper location)
(1) Freight in & Handling costs
(2) Insurance costs → in transit
(3) Employee benefits from construction of PPE
- Dismantling costs
- Testing costs (net of proceeds from sample)

Answer 2

Yes

Question 3

Included as PPE
- bearer plants
- animal-related recreational activity
- rental to others of what property?
- what type of spare parts?

Answer 3

• rental of movable property
  if immovable = investment property
• major spare parts
  if minor = inventory / prepaid supplies

Question 4

Exluded as PPE
- Biological Assets
- Wasting Assets
- what type of lease?

Answer 4

Finance Lease

Question 5

Donation
- dr. PPE / cr. ???
- are costs incurred in relation to donation expensed?

Answer 5

• shareholder = donated capital
• unconditional = income
• conditional = liability

Costs incurred - what is credited is debited (not expense)

Question 6

How to measure PPE if in exchange of shares?

Answer 6

1. FV of asset given up
2. FV of shares
3. Par Value of shares

with Share Premium

Question 7

How to measure PPE if in exchange of bonds?

Answer 7

1. FV of asset given up
2. FV of bonds
3. Face amount of bonds

Question 8

How to measure PPE if in exchange of another asset?

What if with no commercial substance?
How to compute gain/loss?

Answer 8

1. FV of asset given up + payments - receipts
2. FV of asset received
3. CA of asset given up + payments - receipts

No Commercial Substance = use no.3

vs CA = gain/loss

Question 9

LAND AND OLD BUILDING AT A SINGLE COST
- what if old building is usable?
- if unusable?

Answer 9

Old Bldg is usable - allocated based on FV
Old Bldg is unusable - allocate to land only

Question 10

Cost of Old Building
- what is the treatment?

Answer 10

if inventory → capitalized (inventory → DACs + IDACs)
if PPE / IP → expensed (PPE / IP → DACs only)

Question 11

Demolition Cost
- this is capitalized to what account?

Answer 11

to building
- proceeds from scrap → deducted

Question 12

Real Property Taxes
- what is the treatment?

Answer 12

Unpaid and Assumed → capitalize to land
x → expensed (silent)

Question 13

Options to Buy Land
- what is the treatment?

Answer 13

Land is Acquired → capitalize to land
x → expensed

Question 14

Payment to Tenants
- what is the treatment?

Answer 14

to prepare land → capitalize to land
to vacate building → capitalize to building

Question 15

Land Improvements (No Depreciation)
- this is capitalized to what account?

Answer 15

to land

Question 16

Land Improvements (With Depreciation)
- what is the treatment?

Answer 16

Part of Blueprint → capitalize to building
x → capitalize to land improvements (silent)

Question 17

Building Fixtures
- what is the treatment?

Answer 17

Immovable → capitalize to building
Movable → Furniture and Fixture (depreciated)

Question 18

Ventilation, Elevator, Lighting Systems
- what is the treatment?

Answer 18

During Construction → capitalize to building
x → improvements (depreciated)

Question 19

DEPRECIATION
- begins → available for use
- stops → derecognized or available for sale
- if RV > CA → stop depreciation (!!!)

Answer 19

Depreciation → does not stop even if asset is idle temporarily

Question 20

What depreciation method ignore RV and instead use CA in computing depreciation?

Answer 20

Declining Balance

Question 21

Group and Composite Method
- No G/L on sale → since AD is for all asset

Answer 21

Yes

Question 22

Rate for SYD method

Answer 22

n, (n-1) …. / [n (n+1) / 2]

Question 23

Rate for Declining Balance

Answer 23

SLR x 150% or 200%

Question 24

Rate for Group and Composite Method

Answer 24

Yearly Depreciation / Total Cost

Question 25

Life for Group and Composite Method

Answer 25

Depreciable Amount / Yearly Depreciation

Question 26

CHANGE IN METHOD, RV, USEFUL LIFE - Accounting Estimate → prospectively SUBSEQUENT COSTS - improves the asset → capitalized - major repairs → capitalized - minor repairs → expensed

Answer 26

Yes

Question 27

Formula - Cost Model - Revaluation Model

Answer 27

Cost Model - Cost less Accumulated AD less Accumulated Impairment Loss Revaluation Model - Revalued Amount less Subsequent AD less Subsequent Impairment Loss

Question 28

What is the revalued amount?

Answer 28

Either - fair value - depreciated replacement cost (sound value)

Question 29

REVALUATION SURPLUS - OCI account (net of tax) - transferred to RE → **sold or depreciated**

Answer 29

Yes

Question 30

Table Format of Revaluation

Answer 30

refer to notes

Question 31

When to impair assets?

Answer 31

CA > RA

Question 32

What is the recoverable amount?

Answer 32

Higher of (only a few na higher of) - FVLCTS - Value in use (cashflows → pretax) ## Footnote Recoverable Amount → as if new cost (to compute new depreciation)

Question 33

Table Format of Impairment

Answer 33

refer to notes

Question 34

What are the 2 steps in impairment of CGU?

Answer 34

1. Allocate to goodwill 2. If excess, to other **noncash** assets based on CA (CA → impaired up to RA only) ## Footnote Cash → hindi naman naiimpair