Activity 6 – Chapter 23 Property, Plant and Equipment
Problem 23-4 (IAA)
Prepare journal entries to record the machinery acquisitions and related interest.
Anson Company
Journal Entries
1. Acquisition:
Machinery P3,000,000
Accounts payable P3,000,000
Payment:
Accounts payable 3,000,000
Purchase discount loss (3,000,000 x 0.10) 300,000
Cash 3,000,000
Machinery 300,000
Loss on retirement of old Machine 50,000
Spare parts inventory 150,000
Cash 200,000
2. Acquisition:
Machinery P4,700,000
Interest Expense 800,000
Cash 500,000
Notes payable 5,000,000
Payment:
Notes Payable 5,000,000
Cash 5,000,000
3. Acquisition:
Machinery (500,000 x 3.17) 1,585,000
Discount on note payable 415,000
Note payable 2,000,000
Payment at the end of the year:
Note Payable 500,000
Cash 500,000
Interest Expense (1,585,000 x 10%) 158,500
Discount on note payable 158,500
4. Acquisition:
Machinery (2,000,000 x 0.68) 1,360,000
Discount on note payable 640,000
Note payable 2,000,000
Interest:
Interest Expense (10% x 1,360,000) 136,000
Discount on note Payable 136,000
Problem 23-8 (AICPA Adapted)
Prepare journal entries to record the exchange transaction.
Mellow Company
Journal Entries
Equipment – new 1,400,000
Accumulated Depreciation 600,000
Equipment – old 1,000,000
Cash 980,000
Gain in exchange 20,000
Problem 23-10 (IAA)
Compute the cost of finished goods and building.
1. Total Finished goods Building
Direct labor 6,000,000 4,200,000 1,800,000
Materials 7,000,000 3,000,000 4,000,000
Overhead 2,000,000 2,000,000 -
15,000,000 9,200,000 5,800,000
2. Total Finished goods Building
Direct labor 6,000,000 4,200,000 1,800,000
Materials 7,000,000 3,000,000 4,000,000
Overhead 2,000,000 - -
135/180 x 2,000,000 1,500,000
45/180 x 2,000,000 500,000
15,000,000 8,700,000 6,300,000
3. Total Finished goods Building
Direct labor 6,000,000 4,200,000 1,800,000
Materials 7,000,000 3,000,000 4,000,000
Overhead 2,000,000 - -
42/60 x 2,000,000 1,400,000
18/60 x 2,000,000 600,000
15,000,000 8,600,000 6,400,000
Problem 23-11 (IAA)
a. Calculate the cost of the machinery, assuming that manufacturing activities are to be
charged with overhead at the rate experienced in the prior year.
Materials P500,000
Direct Labor 1,000,000
*Overhead 600,000
Cost of Machinery P2,100,000
Overhead P3,600,000
Charged to finished goods (75% x 4,000,000) (3,000,000)
*Charged to machinery P600,000
b. Calculate the cost of the machinery if manufacturing and construction activities are to
be charged with overhead at the same rate.
Materials P500,000
*Direct Labor 1,000,000
Overhead (1/5 x 3,600,000) 720,000
Cost of Machinery P2,200,000
Finished Goods P4,000,000 (4/5)
*Machinery 1,000,000 (1/5)
Direct Labor P5,000,000
Problem 23-15 (AICPA Adapted)
1. What amount should be recorded as initial cost of the machine?
P200,000 x 5.712 = d. P1,142,400
2. What amount should be recorded as discount on note payable on December 31,
2021?
P200,000 x 8 payments P1,600,000
Less: Initial cost (1,142,400)
Discount on note payable - December 31, 2021 b. P457,600
3. What amount should be recorded as interest expense for 2022?
Initial cost P1,142,400
Noninterest bearing note P200,000
Carrying value of the notes – Dec. 31, 2021 P942,400
Multiply by 0.11
Interest expense – 2022 b. P103,664
4. What is the carrying amount of note payable on December 31, 2022?
Noninterest bearing note P200,000
Less: Interest expense (P103,664)
Amount applied to principal P96,336
Carrying value of the notes – Dec. 31, 2021 P942,400
Less: Amount applied to principal (P96,336)
Carrying value of the notes – Dec. 31, 2022 b. P846,064
Problem 23-28 Multiple choice (PAS 16)
1. d
2. b
3. d
4. a
5. d
Problem 23-29 Multiple choice (IAA)
1. b
2. a
3. a
4. c
5. b
Problem 23-30 Multiple choice (AICPA Adapted)
1. d
2. a
3. b
4. a
5. c
