The draft balance sheet of Honesty Corporation as of December 31, 2019 reported the net property, plant and
equipment at P6,270,000. Details of the amount follow:
Land at cost P1,000,000
Building at cost P4,000,000
Less accumulated depreciation at 12/31/18 ( 800,000) 3,200,000
Plant at cost 5,200,000
Less accumulated depreciation at 12/31/18 (3,130,000) 2,070,000
The following matters are relevant:
(a) The company policy for all depreciation is that a full year's charge is made in the year of acquisition or completion
and none in the year of disposal.
(b) Included in the sales revenue is P300,000 being the sales proceeds of an item of plant that was sold on June 30,
2019. The plant had originally cost P900,000 and had been depreciated by P630,000 as of December 31, 2018.
Other than recording the proceeds in sales and cash, no other accounting entries for the disposal of the plant
have been made. All plant is depreciated at 25% per annum on the reducing balance basis.
(c) On September 30, 2019, the company completed the construction of a new warehouse. The construction was
achieved using the company's own resources as follows:
Purchased materials P150,000
Direct labor 800,000
Design and planning costs 20,000
Included in the above figures are P10,000 for materials and P25,000 for labor costs that were effectively lost due
to the foundations being too close to a neighboring property. All the above costs are included in cost of sales.
The building was brought into immediate use upon completion and has an estimated useful life of 20 years
(d) At the beginning of the current year, the company had an open market basis valuation of its properties
(excluding the newly constructed warehouse). Land was valued at P1.2 million and the property at P4.8 million.
The directors wish these values to be incorporated into the financial statements. The properties had an
estimated remaining life of 20 years at the date of the valuation (straight-line depreciation is used). The company
makes a transfer to retained earnings in respect of the excess depreciation on revalued assets.
(e) Depreciation for the year 2019 has not yet been accounted for the in the draft financial statements.
Based on the above and the result of your audit, answer the following:
1. The carrying amount of the new warehouse as of December 31, 2019 is.
2. The carrying amount of plant as of December 31, 2019 is.
3. The total depreciation for the year ended December 31, 2019 is
4. The revaluation surplus as of December 31, 2019 is.
1) Carrying amount of warehouse, 12/31/19 = 950,000 2)... View the full answer