Audit of PPE

PROBLEM 1: PINNACLE COMPANY PINNACLE Company's Property, Plant and Equipment accounts at December 31, 2021 included the following balances: Land P 607,500 Building 1 1,392,500 Accumulated Depreciation - Building 214,542 Vehicles 2 351,000 Accumulated Depreciation - Vehicles 147,420 Machinery 3 682,500 Accumulated Depreciation - Machinery 361,500 1 Purchased October 25, 2018 2 Purchased November 21, 2020; reflects the total amount paid for two identical delivery vehicles, each of which cost P175,500 Reflects the total amount paid for two machines - Machine 1 purchased on October 7, 2018 for P322,500 and Machine 2 purchased on February 4, 2019 for P360,000 The depreciation method, residual value and useful life used for each PPE is presented below: Depreciation Method Useful life Residual Value Building Straight Line 20 years P 37,500 Vehicles 300% Declining Balance 7.5 years 50,000 Machinery 1 Straight Line 5 years 18,750 Machinery 2 Straight Line 6 years 22,500 PINNACLE Company calculates depreciation to the nearest month. The company's financial year-end is December 31. The following transactions occurred from January 1, 2022 to December 31, 2024: 2022 January 3 Bought a new machine (Machine 3) for a cash price of P427,500. Freight charges of P3,315 and installation costs of P13,185 were paid in cash. The useful life and residual value were estimated at 5 years and P30,000, respectively. June 22 Bought a second-hand vehicle (Vehicle 3) for P114,000 cash. Repainting costs of P4,913 and a new set of tires costing P2,587 necessary to bring the vehicle to use were also paid for in cash. The useful life and residual value were estimated at 5 years and P25,000, respectively. August 28 Exchanged Machine 1 for office furniture that had a fair value of P93,750 at the date of exchange. The fair value of Machine 1 at the date of exchange was P86,250. The office furniture originally cost P270,000 and, to the date of exchange, had been depreciated by P180,750 in the previous owner's books. PINNACLE Company estimated the office furniture's useful life and residual value at eight years and P4,050, respectively. The straight-line method of depreciation is to be used. December 31 Recorded depreciation. 2023 April 30 Paid for repairs and maintenance on Machinery 2 amounting to P6,960. May 25 Sold one of the vehicles (Vehicle 1) bought on November 21, 2020 for P49,500 cash. June 26 Installed a fence around the land where the building is located at cost of P41,250. The fence is to be depreciated using the straight-line method with an estimated useful life of 10 years and zero residual value. December 31 Recorded depreciation. 2024 January 5 Overhauled Machine 2 at cost of P90,000, after which PINNACLE Company estimated its remaining life at one additional year and revised its residual value to P37,500. June 20 Traded in the remaining vehicle (Vehicle 2) bought on November 21, 2020 for a new vehicle (Vehicle 4). A trade-in allowance of P27,750 was received and P174,750 was paid in cash. The useful life and residual value were estimated at 5 years and P25,000, respectively. October 4 Scrapped the vehicle bought on June 22, 2022 as it has been badly damaged in a traffic accident and it was not worthwhile repairing it. December 31 Recorded depreciation. Requirement: Prepare Lapsing Schedule of PINNACLE Company from 2022 to 2025