Amicable Company purchased a machine at a cost of P635,000 on January 1, 2019. It was estimated that the machine would have a residual value of P35,000. The estimated useful life is 5 years, 60,000 service hours and 150,000 production units. Actual Operations Service Hours Units Produced 2019 14 000 34 000 2020 13 000 32 000 2021 10 000 25 000 2022 11 000 29 000 2023 12 000 30 000 Required: Prepare a depreciation table for the following methods: Straight line Service hours Production method
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PROBLEM A :
Amicable Company purchased a machine at a cost of P635,000 on January 1, 2019. It was estimated that the machine would have a residual value of P35,000.
The estimated useful life is 5 years, 60,000 service hours and 150,000 production units.
Actual Operations Service Hours Units Produced
2019 14 000 34 000
2020 13 000 32 000
2021 10 000 25 000
2022 11 000 29 000
2023 12 000 30 000
Required:
Prepare a
- Straight line
- Service hours
- Production method
PROBLEM B :
Happy Company owned a power plant which consisted of the following assets all acquired at the beginning of current year:
Asset Cost Residual Value Useful Life
In Years
Building 6 100 000 100 000 20
Machinery 2 550 000 50 000 5
Equipment 1 030 000 30 000 10
Required:
- Compute the composite rate.
- Compute the composite life.
- Prepare
journal entry to record the depreciation for the current year following the composite method. - Prepare journal entry to record the retirement of the machinery at the end of the fifth year assuming the proceeds from retirement amount to P40,000.
- Prepare journal entry to record the depreciation for the sixth year following the composite method.
PROBLEM C :
Bitter Company acquired a machinery on April 1, 2019.
Cost 1,200,000
Residual value 120,000
Estimated Useful life 8 years
Requirements:
- What is the depreciation for 2019 using sum of years’ digits?
- What is the depreciation for 2020 using sum of years’ digits?
- What is the depreciation for 2019 using double declining balance method?
- What is the depreciation for 2020 using double declining balance method?
PROBLEM D :
On January 1, 2019, Layman Company purchased personal computers for P6,000,000. The management estimated that the computers would last approximately 4 years with residual value of P600,000. The entity used the double declining balance method.
During January 2020, the management realized that technological advancement had made the computers virtually obsolete and proposed changing the remaining useful life to 2 years.
What amount of depreciation should be recognized for 2020?
PROBLEM D :
Fauna Company used the inventory method to account for numerous small tools. The balance of the tools account on January 1, 2019 was P140,000.
The following transactions occurred with respect to the small tools during the current year.
Acquisition at cost
March 31 40,000
July 31 20,000
Sale of used tools at salvage 4 000
value on December 31
Inventory of small tools on 150,000
December 31, at cost
Required:
Prepare journal entries to record the transactions related to the tools account.
PROBLEM E:
Tarnish Company purchased equipment on January 1, 2019 for P5,000,000. The equipment had an estimated 5-year useful life. The accounting policy for 5-year assets is to use the 200% double declining balance method for the first two years of the asset’s life and then switch to straight line depreciation.
On December 31, 2021, what amount should be reported as
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