Analyze and answer the given problems. Encircle the letter of the correct answer. Use 10-column worksheet for the solutions. (7 items x 5 points)

PROBLEM I

On January 1, 2X09, Jolly Co. acquired a building at a cost of P5,000,000. The building has been depreciated on the basis of a 20-year life. On January 1, 2X14, an appraisal of the building showed a replacement cost of P8,000,000 with no change in useful life.

1.Ignoring income tax, what amount should be credited to revaluation surplus on January 1, 2X14?

a.P3,000,000

b.P2,250,000

c.P4,250,000

d.P6,000,000

2.What is the depreciation for 2X14? a. P250,000

b. P150,000

c.P400,000

d.P300,000

3.What is the revaluation surplus that should be reported in December 31, 20X4 statement of financial position?

a.P2,100,000

b.P2,250,000

c.P1,850,000

d.P2,800,000

PROBLEM II

Macro Company applied revaluation accounting to plant assets with carrying amount of P4,000,000 on January 1, 2X14, useful life of four (4) years, and no residual value. Depreciation is calculated on the straight line basis. On December 31, 2X14, independent appraisers determined that the asset has a fair value of P3,750,000.

1.Which of the following is a correct debit/credit entry in recording the depreciation for 2X14?

a.Dr. accumulated depreciation P1,000,000

b.Dr. depreciation P250,000

c.Cr. accumulated depreciation P250,000

d.Dr. depreciation P1,000,000

2.Which of the following is a correct debit/credit entry in recording revaluation on December 31, 2X14?

a.Dr. accumulated depreciation P250,000

b.Cr. depreciation P750,000

c.Cr. plant asset P750,000

d.Cr. revaluation surplus P750,000

3.Which of the following information is included in the 2014 financial statements?

a.Accumulated depreciation P1,000,000

b.Depreciation P250,000

c.Plant asset P3,750,000

d.Revaluation surplus P250,000

4.Which of the following is a correct debit/credit entry in recording depreciation for 2X15?

a.Dr. accumulated depreciation P1,000,000

b.Dr. depreciation P1,250,000

c.Cr. accumulated depreciation P750,000

d.Dr. depreciation P1,000,000