PROBLEM #3

On Jan. 1, 2015, ABC Leasing Inc. acquired a building for a total capitalizable cost of P20,000,000. It is being depreciated over 25 years to a salvage value of P4,000,000.

On Jan. 1, 2021, ABC revalued the old building. Creating the same building now would cost P25,000,000. The old building can be used for 20 more years as of this date. By the end of its useful life, it can be sold for P5,000,000.

How much is the revaluation surplus to be reported on the Statement of Financial Position as of Dec. 31, 2025 assuming that ABC records piecemeal realization of the Revaluation Surplus?

PROBLEM #4

ABC Corporation bought an equipment with a total cost of P4,000,000 on Jan. 1, 2016. It was depreciated using the straight-line method over 20 years with a salvage value of P400,000.

On Jan. 1, 2020, there is a foreseen decrease in the useful life of the equipment to only 8 remaining years. Hence, the asset is being tested for impairment. The current fair value less cost to sell is P600,000 while the salvage value at the end of the useful life is P400,000. Annual net operating cash flows is foreseen to be at P200,000 per year. The effective interest rate to be used for impairment testing is 6%.

How much is the impairment loss?

PROBLEM #5

ABC Corporation is testing the impairment of a cash generating unit that includes the accounts as shown in the image.

The inventories can be sold for a net amount of P400,000 while the receivables can be realized at carrying amount.

The expected cash flows from the unit is P1,200,000 for the first five years and P600,000 for the last five years. ABC deems it appropriate to have a discount rate of 8%.

What is the net carrying value of the plant after impairment?