Use the following information for numbers 13 and 14 On January 1, 20x1, Levi Co. acquired a building for P22,000,000. Levi Co. estimated a useful life of 25 years and a residual value of P2,000,000. Levi Co. uses the straight line method of depreciation, and is subject to an income tax rate of 30%. On December 31, 20x6, Levi Co. revalued the building and determined the following information: Actual life Remaining historical life Total economic life Remaining economic life Replacement cost Residual value 6 years 19 years 28 years 21 years P30,000,000 P3,000,000 Levi Co. opted to periodically transfer within the equity a portion of the revaluation surplus on a piecemeal basis. How much are the carrying amounts of the building and the revaluation surplus on December 31,207 ? 13. Building A. 23,250,000 B. 22,285,714 C. 21,367,921 D. 20,985,618 14. Revaluation surplus A. 4,235,000 B. 4,033,333 C. 3,937,667 D. 3,933,333 15. The carrying amount of an item of property, plant and equipment that is subsequently accounted for under the cost model is equal to A. the historical cost less any accumulated depreciation. B. the fair value less any accumulated depreciation. C. the historical cost less any accumulated depreciation and any accumulated impairment loss. D. the fair value less any accumulated depreciation and any accumulated impairment loss. 16. On December 31, 2021, the building of LITHE FLEXIBLE Co. was revalued. Information determined on revaluation date is as follows: Historical cost Accumulated depreciation Initial estimate of residual value Actual life on revaluation date Replacement cost Effective life Remaining economic life Income tax rate 72,000,000 16,000,000 8,000,000 10 144,000,000 12 20 30% The estimate of residual value remained unchanged. How much are the (1) revaluation surplus, net of tax, on December 31,2021 and (2) revised annual depreciation in periods subsequent to December 31, 2021? A. 25,900,000;4,650,000 C. 37,000,000;4,650,000 B. 37,000,000;895,000 D. 25,900,000;4,250,000 17. On January 1, 20x1, KNAVE RASCAL Co. acquired a machine for a total cost of 980,000,000. The machine was depreciated using the sum-of-the-years' digits method over a period of 10 years. On January 1, 20x4, KNAVE Co. changed its depreciation method to the double declining balance method. How much is the depreciation expense in 204 ? A. 40,727,272 B. 12,556,780 C. 11,635,782 D. 13,556,702 18. Subsequent to initial recognition, an entity shall use this model to account for its items of property, plant and equipment. A. cost model C. revaluation model B. fair value model D. a or c as an accounting policy choice Page 3 of 5 19. On January 1, 2011, DIMINUTIVE SMALL Co. signed a ten-year lease for office space. DIMINUTIVE has the option to renew the lease for an additional five-year period on or before January 1, 2020. During the first half of January 2012, DIMINUTIVE Co. incurred the following costs: - P3,600,000 for general improvements, with an estimated useful life of ten years, on the leased premises. - P400,000 for office furniture with an estimated useful life of ten years. - P800,000 for movable assembly line equipment with a useful life of 5 years. At the time the leasehold improvements were finished, DIMINUTIVE Co. was uncertain as to the exercise of the lease renewal option. How much is the depreciation expense on the leasehold improvements in 2012? A. 400,000 B. 360,000 C. 533,333 D. 488,889 20. DEPLORABLE BAD Co. acquired a machine on October 5,201 for a total cost of P160,000. The machine was estimated to have a useful life of 4 years and a salvage value of P10,000. DEPLORABLE BAD Co. uses the sum-of-the-years' digits method and prorates full-year depreciation to the nearest month. DEPLORABLE BAD Co. sold the machine on December 27,202 for P40,000. How much is the gain (loss) on the sale? A. (48,750) B. 48,750 C. (32,250) D. 32,250 Use the following information for numbers 13 and 14 On January 1, 20x1, Levi Co. acquired a building for P22,000,000. Levi Co. estimated a useful life of 25 years and a residual value of P2,000,000. Levi Co. uses the straight line method of depreciation, and is subject to an income tax rate of 30%. On December 31, 20x6, Levi Co. revalued the building and determined the following information: Actual life Remaining historical life Total economic life Remaining economic life Replacement cost Residual value 6 years 19 years 28 years 21 years P30,000,000 P3,000,000 Levi Co. opted to periodically transfer within the equity a portion of the revaluation surplus on a piecemeal basis. How much are the carrying amounts of the building and the revaluation surplus on December 31,207 ? 13. Building A. 23,250,000 B. 22,285,714 C. 21,367,921 D. 20,985,618 14. Revaluation surplus A. 4,235,000 B. 4,033,333 C. 3,937,667 D. 3,933,333 15. The carrying amount of an item of property, plant and equipment that is subsequently accounted for under the cost model is equal to A. the historical cost less any accumulated depreciation. B. the fair value less any accumulated depreciation. C. the historical cost less any accumulated depreciation and any accumulated impairment loss. D. the fair value less any accumulated depreciation and any accumulated impairment loss. 16. On December 31, 2021, the building of LITHE FLEXIBLE Co. was revalued. Information determined on revaluation date is as follows: Historical cost Accumulated depreciation Initial estimate of residual value Actual life on revaluation date Replacement cost Effective life Remaining economic life Income tax rate 72,000,000 16,000,000 8,000,000 10 144,000,000 12 20 30% The estimate of residual value remained unchanged. How much are the (1) revaluation surplus, net of tax, on December 31,2021 and (2) revised annual depreciation in periods subsequent to December 31, 2021? A. 25,900,000;4,650,000 C. 37,000,000;4,650,000 B. 37,000,000;895,000 D. 25,900,000;4,250,000 17. On January 1, 20x1, KNAVE RASCAL Co. acquired a machine for a total cost of 980,000,000. The machine was depreciated using the sum-of-the-years' digits method over a period of 10 years. On January 1, 20x4, KNAVE Co. changed its depreciation method to the double declining balance method. How much is the depreciation expense in 204 ? A. 40,727,272 B. 12,556,780 C. 11,635,782 D. 13,556,702 18. Subsequent to initial recognition, an entity shall use this model to account for its items of property, plant and equipment. A. cost model C. revaluation model B. fair value model D. a or c as an accounting policy choice Page 3 of 5 19. On January 1, 2011, DIMINUTIVE SMALL Co. signed a ten-year lease for office space. DIMINUTIVE has the option to renew the lease for an additional five-year period on or before January 1, 2020. During the first half of January 2012, DIMINUTIVE Co. incurred the following costs: - P3,600,000 for general improvements, with an estimated useful life of ten years, on the leased premises. - P400,000 for office furniture with an estimated useful life of ten years. - P800,000 for movable assembly line equipment with a useful life of 5 years. At the time the leasehold improvements were finished, DIMINUTIVE Co. was uncertain as to the exercise of the lease renewal option. How much is the depreciation expense on the leasehold improvements in 2012? A. 400,000 B. 360,000 C. 533,333 D. 488,889 20. DEPLORABLE BAD Co. acquired a machine on October 5,201 for a total cost of P160,000. The machine was estimated to have a useful life of 4 years and a salvage value of P10,000. DEPLORABLE BAD Co. uses the sum-of-the-years' digits method and prorates full-year depreciation to the nearest month. DEPLORABLE BAD Co. sold the machine on December 27,202 for P40,000. How much is the gain (loss) on the sale? A. (48,750) B. 48,750 C. (32,250) D. 32,250