Chapter 5- Property, Plant and Equipment

CHAPTER 5
PROPERTY, PLANT AND EQUIPMENT
PROBLEMS
5-1

(Uy Company)
Land
Office building
Warehouse
Managers
residence

5.2

5-3

(6,750,000
(6,750,000
120,000
(6,750,000
(6,750,000

x 2,187,500/5,625,000)
x 2,000,000/5,625,000) +

2,625,000
2,520,000

x 937,500/5,625,000)
x 500,000/5,625,000)

1,125,000
600,000

(Chang Corporation)
a.
720,000 x .90
b.
Down payment
Present value of 24 monthly installments
25,000 x 21.24
Total

P648,000
P150,000
531,000
P681,000

(Urban Corporation)
Land
Land purchase

Land
Improvement
s

Building

P2,000,00
0
300,000
150,000

Demolition of old building

Legal fees for land acquisition
Building permit fees
Interest on loan for construction
Building construction costs
Assessment by the city government for
sewer connection
Landscaping costs*
Equipment purchased of use in excavation
Fixed overhead allocated to building
construction
Salvage from the demolished building
Sale of excavation equipment
Total costs

P
80,000
270,000
5,000,000
120,000
P350,000

800,000
100,000

(70,000)
P2,500,00
0

P350,000

(640,000)
P5,610,000

Compensation for injury to construction worker is chargeable to loss; this expenditure

could have been avoided had the company obtained insurance on its workers. If an
insurance was acquired, the amount of premiums paid may be charged to the
building being constructed.
Profit on construction is not recognized anywhere in the accounts.
The selfconstructed asset should be charged for the actual costs incurred in its completion.
Modifications to the new building per instruction by the building inspectors is charged
to loss since this expenditure is not a necessary expense for the asset. This was
incurred as a result of the companys negligence and could have been avoided had
proper planning been done.

30

Chapter 5- Property, Plant and Equipment

*Landscaping costs may be charged to the land account if there is an indication that
such an expenditure is permanent in nature.

5-4

5-5

(Doy Company)
Purchase price of land
Payments to tenants to vacate premises
Demolition of old building
Legal fees for purchase contract and recording ownership
Title guarantee insurance
Proceeds from sale of salvaged materials
Total
(Yu Corporation)

P4,000,000
200,000
100,000
50,000
20,000
(10,000)
P4,360,000

Land
I
m
pr
ov
e
m
en
ts
P 10,000

Balances, December 31, 2008

Cost of fencing the property
Paid to a contractor for building erected
Building permit fee
Excavation expenses
Architects fees
Invoice cost of machines acquired
Freight, unloading and delivery charges
Custom duties and other charges
Allowances, etc. to technicians during
installation
Balances, December 31, 2009

110,000

P120,000

Buildings

P
900,000
2,000,000
20,000
50,000
50,000

P3,020,00
0

Machinery
and
Equipment

P 980,000

2,000,000
60,000
140,000
400,000
P3,580,000

The interest of P150,000 is an imputed interest and is not recognized anywhere in the
financial statements.
The royalty payments of machines purchased is charged to operating expense for the
period.
5-6
50,000
55,000

a.

Cash price

b.

Downpayment

P215,000
P

Notes payable (35,000 x 3.1699)

Preference shares (500 x 110)
Cost of machine
P215,947

31

110,947

Chapter 5- Property, Plant and Equipment

c.
Purchase price
P22,000,000
Appraisal cost
Total cost to be allocated
Allocation:
Land
22,150,000 x 10,000/25,000
8,860,000
Building
22,150,000 x 12,500/25,000
11,075,000
Equipment
22,150,000 x 2,500/25,000
d.

P
P
P 2,215,000

Cash price
800,000 x .90 x .98
Present value of the disposal costs
50,000 x 0.5019

25,095

5.7

150,000
P22,150,000

P705,600

Cost of equipment

P730,695

(Planters Company and Producers Company)

Books of Planters Company
Cash
Equipment
Accumulated Depreciation-Building
Loss on Exchange of Building
Building

50,000
350,000
540,000
60,000
1,000,000

1,000,000-540,000 = 460,000 book value

460,000 400,000 = 60,000 loss

Books of Planters Company

Building
Accumulated Depreciation-Equipment
Cash
Gain on Exchange of Equipment
Equipment
600,000-320,000 = 280,000
280,000 350,000 = 70,000 gain

(Far East Company)

a.
Direct materials
P220,000
Direct labor
Overhead costs (125% x 150,000
Allocated fixed costs (20% 700,000)
140,000
Total before interest cost
Capitalized interest: (300,000 x 10% x 6/12)
15,000
Total cost of equipment
P712,500

400,000
320,000

50,000
70,000
600,000

5-8

b.

Average accumulated expenditures: (697,500/2)

Capitalized interest:

32

150,000
187,500
P697,500

P348,500

Chapter 5- Property, Plant and Equipment

300,000 x 10% x 6/12
15,000

48,750 x 16% x 6/12

Total capitalized interest

18,900
5-9

P
3,900
P

(Metro Company)
a.
4,000,000 x 10%
Less interest income earned on temporary investment of loan
( 85,000)
Capitalized interest
b.

40,000
c.

P400,000
P315,000

1,000,000 x 10%
1,000,000 x 10% x 9/12
1,000,000 x 10% x 6/12
1,000,000 x 10% x 3/12
Total interest
Less interest income earned on temporary investment of loan

P100,000
75,000
50,000
25,000
P250,000

Capitalized interest

P210,000

Computation of average accumulated expenditures:

400,000 x 12/12

400,000
1,000,000 x 9/12
750,000
1,200,000 x 5/12
500,000
1,000,000 x 3/12
250,000
400,000 x 0/12
Average accumulated expenditures
P1,900,000

Computation of weighted average interest rate:

(10% x 1,200,000) + (12% x 1,600,000)
1,200,000 + 1,600,000
Interest of specific borrowing:
1,600,000 x 10%
Less interest earned
Interest on general borrowing:
300,000 x 11.14%
Capitalized interest
d.

2,800,000 x 10%
1,600,000 x 10%
2,000,000 x 12%
Total interest on loans
P680,000
Less capitalized interest: (1,900,000 x 10.625%*)
Interest expense for 2008

----------

11.14%
P160,000
20,000

P140,000
33,420
P173,420
P280,000
160,000
240,000
201,875
P478,125

* 680,000 6,400,000 = 10.625%

5-10

(Lim Company)
360,000 x 12/12
600,000 x 7/12
350,000

P 360,000

33

Chapter 5- Property, Plant and Equipment

a.

b.
144,000

1,500,000 x 6/12
1,500,000 x 1/12
Average accumulated expenditures

750,000
125,000
P1,585,000

Interest of specific borrowing (3,000,000 x 12%)

Less interest revenue earned from temporary investments of
specific borrowing
Capitalized interest

P 360,000

Interest on specific borrowing (1,200,000 x 12%

49,000
P 311,000

Less interest revenue earned from temporary

investments of specific borrowing
49,000
95,000

P
Interest on general borrowings
385,000* x 12.14%**
Capitalized interest

46,739
141,739

* 1,585,000 1,200,000 = 385,000

** 680,000 5,600,000 = 12.14%
5-11

5-12

a.
Tooling Machine
Automobile
Gain on Exchange of Automobile
b.
Machine (new)
Accumulated Depreciation-Machine (old)
Loss on Exchange of Machine
Machine (old)
Cash
(850,000340,000)-(1,200,000
880,000)=190,000 loss
(Tan Company)
a.
Depreciation charges for 2008 and 2009
2008
a. SL
(800,000 80,000) / 8 = 90,000
90,000 x 9/12= 67,500
b. Hrs
720,000/100,000 hrs = 7.20/hr.
worked
7.20 x 4,500 hrs = 32,400
c. Units
720,000/900,000 units = 0.80/unit
of
080 x 40,000 units = 32,000
output
d. SYD
720,000 x 8/36 x 9/12 = 120,000

b.

e. DDB

2/8 = 25%
25% x 800,000 x 9/12=150,000

f. 150%
DB

1.5/8 = 18.75%
18.75% x 800,000 x 9/12=
112,500

Carrying amount of the asset at the end of 2009

34

172,800

1,200,000
340,000
190,000

135,000
37,800

850,000
880,000

2009
90,000
7.20 x 5,500 hrs = 39,600
0.80 x 60,000 units =
48,000
720,000 x 7.25/36
=145,000
800,000150,000=650,000
25% x 650,000 = 162,500
800,000112,500=687,500
18.75% x 687,500) =
128,906

Chapter 5- Property, Plant and Equipment

Depreciation Method
a. Straight-line
b. Hours worked
c. Units of output
d. SYD
e. DDB
f. 150% declining
balance
5-13

(Real
a.
b.
c.

P30,000
P18,000

Cost

Accum. Depr.

800,000
800,000
800,000
800,000
800,000
800,000

157,500
72,000
80,000
265,000
312,500
241,406

Carrying
amount
642,500
728,000
720,000
535,000
487,500
558,594

Company)
2/5 = 40%; 26,400 40% = 66,000
12,000 x 5 years = 60,000; 66,000 60,000 = 6,000
Carrying amounts, end of year 3
Straight-line (66,000 36,000)
Sum-of-the-years digits(66,000 48,000

Double-declining balance (66,000 52,744)

P13,256
The method with the lowest carrying amount at time of sale will yield the
highest amount of gain on disposal.Therefore, the double-declining balance
method will provide the highest gain on disposal at the end of year 3.
5-14

5-15

(De Oro Company)

a.
Method 1 Straight-line method
Method 2 Sum-of-the-years digits method
320,000 80,000 = 4 year life
320,000 x 4/10 = 128,000
320,000 x 3/10 = 96,000
Method 3 150% declining-balance method
1.5 4 = 37.5%
37.5% x 340,000
=
37.5% x (340,000-127,500) =

127,500
79,688

b.

P80,000

Straight line method

Sum-of-the-years digits method
320,000 x 2/10
150% declining balance method
37.5% x (340,000-127,500-79,688)

(Citi Company)
a.
Depreciation Expense for 2008
Double-declining balance method
800,000 x 25% x
Sum-of-the-years digits method
720,000 x 8/36
x 1/2
Depreciation Expense for 2009
Double declining
700,000 x 25%
Sum-of-the-years digits method

35

64,000
49,804

P100,000
80,000

P175,000

Chapter 5- Property, Plant and Equipment

b.

720,000 x 8/36
x 1/2
P80,000
720,000 x 7/36 x
70,000
P150,000
Carrying (book) value at December 31, 2009
Double-declining balance method
Date
Depreciation Expense for the year
12/31/08
800,000 x 25% X = P100,000
12/31/09
700,000 x 25%
= 175,000

CV, end
P700,000
525,000

Sum of the years digit method

Cost
Accumulated Depreciation, 12/31/09 (720,000 x 11.5/36)
230,000

Carrying value, 12/31/09

P800,000
P 570,000

5-16

(Total Company)
1.
The company changes to the sum-of-the-years digits method
Cost
Less accumulated depreciation (1,100,000 10) x 4
440,000
Carrying amount of the asset, beginning of 5th year
760,000
Revised depreciation for the 5th year
760,000-100,000 = 660,000; 660,000 x 6/21
188,571
2.
132,000
5-17

It was estimated that the assets remaining life is 5 years.

Revised depreciation for the 5th year
(760,000 100,000) / 5 years

(Chartered Company)
Cost
Less accumulated depreciation
18,000
Carrying amount, January 1, 2009

30,000 x

P1,200,000
P
P

P 32,000

(5+4) / 15

P 14,000

Depreciation expense for 2009 (14,000 x 7/28)

3,500

5-18

(Standard Company)
Cost
P500,000
Less accumulated depreciation:
2005 20% x 500,000
100,000
2006 20% x 400,000
80,000
2007 20% x 320,000
64,000
2008 20% x 256,000
51,200
295,200
Carrying amount, January 1, 2009
P204,800
Depreciation expense for 2009
204,800 10,000 = 194,800; 194,800 5 years
P 38,960

5.19

(Koh Trading)
Carrying amount of the asset, January 1, 2009
Estimated remaining life in years

36

P153,600
8

Chapter 5- Property, Plant and Equipment

Depreciation expense for year ended December 31, 2009

P 19,200

5-20

(Carmi Company)
Cost
P378,000
Less: Accumulated Depreciation, August 1, 2009(378,00035,000)/5 x 2
137,200
Carrying value, August 1, 2009
P240,800
Overhaul costs (capitalized)
80,000
Carrying value after overhaul
P320,800
Depreciation (August December, 2009, see below
22,567
Carrying value, December 31, 2009
P298,233
Depreciation for 2009
(378,000 35,000)/5 x 7/12
(320,800 50,000) / (5 2) + 2 = 270,800 / 5 x 5/12
Total
5-21

5-22

(Chu, Inc.)
Accumulated depreciation at January 1, 2008 (528,000 x 4/8)
Revised depreciation expense for 2008
528,000-264,000 = 264,000; 264,000 / 2 yrs.
Accumulated depreciation at December 31, 2009
(Allied Company)

Purchase price
Residual value
Development costs incurred and capitalized during 2007
Depletable cost
Estimated supply of mineral resources
Depletion expense per ton
Number of tons removed during 2008
Depletion expense for 2008
Depletable cost, January 1, 2008 (see above)
Less depletion expense for 2008
Add development costs incurred and capitalized during 2009
Depletable cost for 2008
Revised estimated supply of mineral resource, 2009
Revised depletion rate per ton
Number of tons removed during 2009
Depletion expense for 2009

5.23

P40,017
22,567
P62,584

(Ong Exploration Company)

Purchase price
Development costs
Salvage value
Restoration costs at present value (2,500,000 x 0.4632)
Depletable cost
Estimated recovery from the property
Depletion rate per metric ton
Resources extracted during 2008
Depletion expense for 2008
Depletable cost, 2008 (see above)
Depletion expense for 2008
Development costs
New depletable cost for 2008
Remaining number of metric tons (9,250,000-1,000,000)
Revised depletion per metric ton
(rounded)

37

P264,000
132,000
P396,000
P4,450,000
( 650,000)
750,000
P4,550,000
3,500,000
P
1.30
x 550,000
P 715,000
P4,550,000
( 715,000)
961,000
P4,796,000
4,360,000
1.10
700,000
P 770,000
P

P45,000,000
1,500,000
( 6,000,000)
1,158,000
P41,658,000
10,000,000
P
4.1658
x 1,000,000
P 4,165,800
P41,658,000
( 4,165,800)
750,000
P38,242,200
8,250,000
P
4.64

Chapter 5- Property, Plant and Equipment

Number of metric tons removed during 2009
Depletion expense for 2009

5.24

x 1,500,000
P 6,960,000

(Family Mining Company)

Depletion rate per ton:
4,000,000 + 400,000 200,000
1,400,000 tons
Depreciation expense per ton:
300,000 20,000
1,400,000 tons
a.

P3.00
P0.20

Cost of ending inventory

2,000 units x 6 months
Production cost per unit
(8.00 + 3.00 + 0.20)
Ending Inventory, December 31, 2008

b.

Cost of goods sold

18,000 units x 6 months
Production cost per unit
Cost of goods sold for 2008

c.

Depletable cost in 2008

Less depletion expense for 2008
20,000 units x 6 months
Depletion rate per ton
New depletable cost for 2009
Revised estimated recovery at January 1, 2009
Revised depletion rate for 2009

12,000
x 11.20
P134,400
108,000
x 11.20
P1,209,600
P4,200,000
120,000
x 3.00

360,000
P3,840,000
800,000
P
4.80

Depreciable cost in 2008

P 280,000
Less depreciation expense for 2008 (120,000 units x 0.20)
24,000
Depreciable cost for 2009
P 256,000
Revised estimated recovery at January 1, 2009
800,000
Revised depreciation rate for 2009
P
0.32
5-25

(Yap Machine Shop)

a.
1. Cash
Accumulated Depreciation-Building
Loss on Disposal of Assets
Land
Building
2.

3.
4.

1,700,000
450,000
150,000

Cash
Accumulated Depreciation-Equipment
Loss on Disposal of Assets
Equipment

120,000
250,000
30,000

Equipment
Cash

298,000

800,000
1,500,000

400,000
298,000

Land
Income from Donated Asset
Cash

8,000,000

38

7,800,000
200,000

Chapter 5- Property, Plant and Equipment

5.
6.

7.

Land
Cash

240,000

Equipment
Accumulated Depreciation-Equipment
Gain on Disposal of Assets
Equipment
Cash

150,000
15,000

240,000

Building
Cash

22,000
40,000
103,000
28,000,000

28,000,000

b.
Beginning balance
(3)
(4)
(5)
(6)
(7)
Total
Balance

Property, Plant and Equipment (Net)

2,150,000 (1)
298,000 (2)
8,000,000
240,000
125,000
28,000,000
38,813,000 Total
36,813,000

1,850,000
150,000

2,000,000

5-26

(Pat Corporation)
a.
Depreciation and amortization expense for year ended December 31, 2009
Buildings
1.5/25 = 6%; (12,000,000-2,631,000) x 6%
P
562,140
Machinery and Equipment
Based on beginning balance (9,000,000 x 10%)
900,000
Less depreciation of machine destroyed
230,000 x 10% x 9/12
17,250
P 882,750
New machine
2,800,000 + 50,000 + 250,000=310,000
3,100,000 x 10% x 6/12
155,000
Total
P1,037,750
Automotive Equipment
Based on beginning balance
180,000
Less depreciation of car traded 180,000 x 2/10 36,000
P
144,000
New car
240,000 x 4/10
96,000
Total
P 240,000
Leasehold Improvement
1,680,000 x 8/80
P 168,000
b.

63,000

Gain ( loss) from disposal of assets

Car traded in
Fair value of car traded in
(240,000 200,000)
Book value of car traded
Machine destroyed by fire
Insurance recovery
Book value of machine (230,000 x 4/10

39

P 40,000
54,000

P(14,000)

P155,000
)
92,000

Chapter 5- Property, Plant and Equipment

Net gain from disposal of assets

49,000

5-27
a.
1/1/07

b.
12/31/0
7

Equipment
Revaluation Surplus
Accumulated Depreciation
3,600,000-2,400,000 = 1,200,000 (50%
Inc.)
50% x 4,000,000 = 2,000,000
50% x 1,600,000 = 800,000
Depreciation Expense

2,000,00
0

600,000

Accumulated Depreciation-Equipment
3,600,000 6 yrs = 600,000
12/31/0
7

Revaluation Surplus

12/31/0
8

Depreciation Expense

600,000
200,000

Retained Earnings
1,200,000 6 yrs = 200,000

200,000
600,000

Accumulated Depreciation-Equipment
12/31/0
8
c.
1/1/09

12/31/0
9

600,000

Revaluation Surplus

200,000

Retained Earnings

200,000

Accumulated Depreciation-Equipment
Revaluation Surplus
Equipment

600,000
400,000

Depreciation Expense

500,000

1,000,000

Accumulated Depreciation-Equipment
2,000,000 4 yrs = 500,000

500,000

Revaluation Surplus
Retained Earnings
1,200,000-200,000-200,000400,000=400,000
400,000 4 yrs = 100,000

Cost
Accum

Origin
al
4.000
M
1.600
M

1/1/07

1/1/07

+2.00
M
+0.80
M

6.000
M
2.400
M

1,200,000
800,000

07-08
+1.20
M

40

100,000
100,000

12/31/0
8
6.00M

1/1/09

1/1/09

-1.00M

5.00M

12//31/0
9
5.00M

3.60M

-0.60M

3.00M

3.50M

Chapter 5- Property, Plant and Equipment

CV

5.28

2.400
M

+1.20
M

3.600
M

-1.20M

2.40M

-0.40M

2.00M

1.50M

(Lu Company)
2009
Jan. 1

Dec. 31

Impairment Loss - Machinery

Accumulated Depreciation-Machinery
(450,000 8 yrs) x 3 yrs. = 168,750
500,000 168,750 = 331,250
331,250 200,000 = 131,250

131,250

Depreciation Expense
Accumulated Depreciation-Machinery
(200,000 20,000) 2 yrs. = 90,000

90,000

MULTIPLE CHOICE QUESTIONS

Theory
MC1
d
MC2

MC3

MC4

MC5

MC6

MC7

MC8

MC9

MC1
0

Problems
MC26
d
MC27
d
MC28
c
MC29
c
MC30
c

MC1
1
MC1
2
MC1
3
MC1
4
MC1
5
MC1
6
MC1
7
MC1
8
MC1
9
MC2
0

b
d
b
d
d

MC2
1
MC2
2
MC2
3
MC2
4
MC2
5

c
b
c
c
c

d
c
a
b
d

14,400,000 x 5/20 = 3,600,000

200,000 + 3,000 + 6,000 = 209,000
(800,000 20,000) x 12/78 x 9/12 = 90,000
780,000 x 11.25/78 = 112,500; 90,000 + 112,500 = 202,500
800,000 202,500 = 597,500

41

131,250

90,000

Chapter 5- Property, Plant and Equipment

MC31

MC32

MC33

MC34

MC35

MC36

MC37
MC38
MC39

d
c
a

MC40

MC41

MC42

MC43

MC44

MC45

MC46
MC47

a
d

MC48

MC49
MC50
MC51

b
b
c

MC52

MC53

MC54

4,500,000 + 30,000 + 6,000 + 40,000 + 60,000 = 4,636,000 Land

10,000 + 50,000 + 90,000 + 45,000 + 150,000 + 9,800,000 =
10,145,000 Building
1,800,000 x 10% = 180,000; 180,000 45,000 = 135,000
2,500,000 1,800,000 = 700,000
700,000 x 9% = 63,000; 135,000 + 63,000 = 198,000
4,000,000 x 10% x 6/12 = 200,000
750,000 x 12% x 6/12 = 45,000; 200,000 + 45,000 = 245,000
1,000,000 + (4,000,000 2) = 3,000,000; 2,000,000 x 10% = 200,000
1,000,000 x 11% = 110,000; 200,000 + 110,000 = 310,000
4,500,000 + 1,320,000 + 77,000 + 53,000 = 5,950,000 total depreciable
cost
112,500 + 66,000 + 9,625 + 13,250 = 201,375 total depreciation
expense
5,950,000 201,375 = 29.5 yrs.
4,800,000 + 1,400,000 + 82,000 + 53,000 = 6,335,000 total cost
201,375 6,335,000 = 3.18%
4,500,000 40 yrs. = 112,500
77,000 x 6/36 = 12,833
240,000 12,000 = 228,000; 228,000 120 mos = 1,900 per mo
1,900 x 63 mos = 119,700
240,000 119,700 = 120,300; 120,300 130,000 = 9,700
270,000 x (8+7)/36 = 112,500
270,000 8 = 33,750; 33,750 x 2 = 67,500
112,500 76,500 = 45,000
1.5/5 = 30% depreciation rate; 600,000 x 30% x = 90,000
600,000 90,000 = 510,000; 510,000 x 30% = 153,000
90,000 x (5+4+3)/15 = 72,000 reported accum depreciation under SYD
90,000 x 2/15 = 12,000
240,000 40 = 6,000; 240,000 x .90 x.90 x .10 = 19,440; 72,000 x 2/10
= 14,400
160,000/4 = 40,000; 400,000/40,000 = 10 years
240,000 40,000 = 200,000; 200,000 65,000 = 135,000
(900,000 300,000) / 3 yrs = 100,000
600,000 + 100,000 = 700,000
900,000 420,000 = 480,000; 480,000 300,000 = 180,000
42,000 x 55 = 2,310,000; 2,310,000/7 = 330,000; 330,000 + 5,000 =
335,000
49,200,000 43,755,000 = 5,445,000; 5,445,000 4.5 years =
1,210,000/yr
1,210,000 x 40 yrs = 48,400,000; 49,200,000 48,400,000 = 800,000
20,500 6,000 = 14,500; 14,500 16,800 = 2,300
40,000 30,000 = 10,000; 20,000 10,000 = 10,000 Gain
54,000,000 6,000,000 + 7,200,000 = 55,200,000; 55,200,000
2,400,000 = 23
3,400,000 200,000 + 800,000 = 4,000,000
4,000,000 4,000,000 = 1.00 per ton; 1.00 x 375,000 tons = 375,000
P0 for Quarry No. 1 since the asset is only being leased.
1,000,000 300,000 = 700,000; 700,000 100 M = 0.007 per ton
0.007 x 1,380,000 = 9,660
.007 x 40,000,000 = 280,000; 700,000 280,000 = 420,000
420,000 20,000,000 = 0.21; 0.21 x 1,380,000 = 28,980

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Chapter 5- Property, Plant and Equipment

MC55

MC56

MC57

MC58

MC59

MC60

MC61

MC62
MC63

d
c

MC64

MC65

3,600,000 800,000 = 4.50; 4.50 x 60,000 = 270,000

96,000 6,000 = 90,000; 90,000 800,000 = 0.1125
0.1125 x 60,000 = 6,750
(8,600,000-600,000) 40 yrs = 200,000; 200,000 x 5 yrs. = 1,000,000
8,600,000-1,000,000-600,000 = 7,000,000; 7,000,000 30 yrs =
233,333
8,000,000 1,000,000 233,333 = 7,366,667
7,500,000 7,366,667 = 133,333
160,000 x 10 yrs = 1,600,000; 4,000,000 1,600,000 = 2,400,000
3,240,000 2,400,000 = 840,000
4,000,000 160,000 = 25 years; 25 10 = 15 years remaining
3,240,000 15 = 216,000
160,000 x 9 yrs. = 1,440,000; 4,000,000 1,440,000 = 2,560,000
2,560,000 500,000 = 2,060,000; 2,060,000 16 yrs. = 128,750
2,060,000 128,750 = 1,931,250; 3,240,000 1,931,250 = 1,308,950
160,000 128,750 = 31,250; 500,000 31,250 = 468,750
1,308,750 468,750 = 840,000
(360,000 6) x 2.5 yrs = 150,000
360,000 150,000 = 210,000 book value; 210,000 70,000 = 140,000
loss
70,000 3.5 remaining years = 20,000; 70,000 20,000 = 50,000
1,800,000 600,000 = 1,200,000; 600,000 3 = 200,000
1,200,000 + 200,000 = 1,400,000
3,000,000 300,000 = 2,700,000; 2,700,000 10 = 270,000
270,000 x 4 = 1,080,000
3,000,000 1,080,000 = 1,920,000; 1,920,000 900,000 = 1,020,000
1,920,000 6 yrs = 270,000 or 2,700,000 10 yrs = 270,000

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