eveille, Inc., purchased Machine #204 on April 2021, and placed the machine into production on April 3, 2021. The following information is relevant to Machine #204: Price P60,000 Freight-in costs 2,500 Preparation and installation costs 3,900 Labor costs during regular production operation 10,200 Credit terms 2/10, n/30 Total productive output 138,500 units The company expects that the machine could be used for 10 years, after which the salvage value would be zero. However, Reveille, Inc., intends to use the machine only eight years, after which it expects to be able to sell it for P9,800. The invoice for Machine #204 was paid April 10, 2021. The number of units produced in 2021 and 2022 were 23,200 and 29,000, respectively. Reveille computes depreciation to the nearest whole month. Required Compute the depreciation for the years indicated, using the following methods (round your answer to the nearest peso): 1. 2021: Units of productions 2. 2022: Sum-of-the-years’- digits method
1. Reveille, Inc., purchased Machine #204 on April 2021, and placed the machine into
production on April 3, 2021. The following information is relevant to Machine #204:
Price P60,000
Freight-in costs 2,500
Preparation and installation costs 3,900
Labor costs during regular production operation 10,200
Credit terms 2/10, n/30
Total productive output 138,500 units
The company expects that the machine could be used for 10 years, after which the salvage
value would be zero. However, Reveille, Inc., intends to use the machine only eight years,
after which it expects to be able to sell it for P9,800. The invoice for Machine #204 was paid
April 10, 2021. The number of units produced in 2021 and 2022 were 23,200 and 29,000,
respectively. Reveille computes
Required
Compute the depreciation for the years indicated, using the following methods (round your
answer to the nearest peso):
1. 2021: Units of productions
2. 2022: Sum-of-the-years’- digits method
2. The Nickle Company purchased an asset for P17,000 on January 2, 2021. The asset has
an expected residual value P1,000. The depreciation expense for 2021 and 2022 is shown
next for three alternative depreciation methods:
Year Method A Method B Method C
2021 P4,000 P6,400 P6,375
2022 4,000 4,800 3,984
Required
1. Which depreciation method is the company using in each example?
2. Compute the depreciation expense for 2023 and 2024 under each method
3. On January 1, 2021 the Emming Corporation purchased some machinery. The machinery
has an estimated life of 10 years and an estimated residual value of P5, 000. The depreciation
on this machinery was P20,000 in 2023.
Required
Compute the acquisition cost of the equipment under the following depreciation methods:
1. Straight-line
2. Sum-of-the-years’-digits
3. Double-declining-balance
4. The Loban Company purchased four cars for P 9,000 each, and expects that they would
be sold in three years for P1,500 each. The company uses group depreciation on a straightline basis.
Required
1. Prepare journal entries to record the acquisition and the first year’s depreciation.
2. If one of the cars is sold at the beginning of the second year for P 7,000, what
entry
5. The Wilcox Company acquires four machines that have the following characteristics:
Machine Cost Estimated Residual Value Estimated Service Life
A P26,000 P2,000 6 years
B 19,000 1,000 9
C 30,000 5,000 5
D 28,000 - 7
Required
1. Prepare journal entries to record the acquisition and the first year’s depreciation,
assuming that the composite method is used on a straight-line basis.
2. If the company sells machine B after four years for P 10,000 prepare the journal entry
6. On May 10, 2021, the Horan Company purchased equipment for P 25,000. The
equipment has an estimated service life of five years and zero residual value. Assume that
straight- line depreciation is used.
Required
Compute the depreciation for 2021 for each of the following four alternatives:
1. The company computes depreciation to the nearest day. (Use 12 months of 30 days
each.)
2. The company computes depreciation to the nearest month. Assets purchased in the
first half of the month are considered owned for the whole month.
3. The company computes depreciation to the nearest whole year. Assets purchased in
the first half of the month are considered owned for the whole year.
4. The company records one-half year’s depreciation on all assets purchased during the
year.
7. On January 1, 2022, the Vallahara Company purchased machinery for P 650,000 which it
installed in a rented factory. It is depreciating the machinery over 12 years by the
straight-line method to a residual value of P 50,000. Late in 2026, because of increasing
competition in the industry, the company believes that its asset may be impaired and will
have a remaining useful life of five years, over which it estimates the asset will produce
total
year. The company is not able to determine the fair value based on a current selling price
of the machinery. The company’s discount rate is 10%.
Required
1. Prepare schedules to determine whether, at the end of 2022, the machinery is
impaired and, if so, the impairment loss to be recognized.
2. If the machinery is impaired, prepare the journal entry to record the impairment.
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