In the audit of the orporation for the year 2020, the following items and Information appeared in the Production Machine account of the client: Date Particulars Debit Credit 01/01 Balance-Machine 1, 2, 3, and 4 at P180,000 each P 720,000 02/28 Machine 5 396,000 Machine 1 P 6,000 09/01 12/01 Machine 6 Machine 7 192,000 432,000 The Accumulated Depreciation account contained no entries for the year 2020. The balance on January 1, 2020 per your audit, was as follows: Machine 1 Machine 2 Machine 3 Machine 4 P168,750 78,750 67,500 45,000 Based on your further inquiry and verification, you noted the following: 1. Machine 5 was purchased for cash; it replaced Machine 1, which was sold on this date for P6,000. 2. Machine 2 was destroyed by the thickness of engine oil used leading to explosion on December 1, 2020. Machine 7 was to replace Machine 2. 3. Machine 3 was traded in for Machine 6 at an allowance of P24,000; the difference was paid in cash and charged to Production Machine account. 4. Depreciation rate is recognized at 25% per annum.

In the audit of the orporation for the year 2020, the following items and Information appeared in the Production Machine account of the client: Date Particulars Debit Credit 01/01 Balance-Machine 1, 2, 3, and 4 at P180,000 each P 720,000 02/28 Machine 5 396,000 Machine 1 P 6,000 09/01 12/01 Machine 6 Machine 7 192,000 432,000 The Accumulated Depreciation account contained no entries for the year 2020. The balance on January 1, 2020 per your audit, was as follows: Machine 1 Machine 2 Machine 3 Machine 4 P168,750 78,750 67,500 45,000 Based on your further inquiry and verification, you noted the following: 1. Machine 5 was purchased for cash; it replaced Machine 1, which was sold on this date for P6,000. 2. Machine 2 was destroyed by the thickness of engine oil used leading to explosion on December 1, 2020. Machine 7 was to replace Machine 2. 3. Machine 3 was traded in for Machine 6 at an allowance of P24,000; the difference was paid in cash and charged to Production Machine account. 4. Depreciation rate is recognized at 25% per annum.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Concept explainers

Audit Procedures

Audit Procedures are methods and techniques performed by the auditor to determine the quality of financial information of clients, thereby expressing an opinion on true & fair view of financial statements and entity position. They are identified and applied at the planning stage of audit after determining audit objectives, scope, approach, and risk assessment.

Question

1. The total depreciation for the year ended December 31, 2020 is
2. The carrying amount of production machine as of December 31, 2020 is

In the audit of the books of Yellow Corporation for the year 2020, the following items and information appeared in the
Production Machine account of the client:
Particulars
Balance-Machine 1, 2, 3, and 4 at
P180,000 each
Credit
Date
01/01
Debit
P 720,000
Machine 5
Machine 1
Machine 6
Machine 7
02/28
396,000
P 6,000
09/01
12/01
192,000
432,000
The Accumulated Depreciation account contained no entries for the year 2020. The balance on January 1, 2020 per your
audit, was as follows:
Machine 1
P168,750
Machine 2
78,750
Machine 3
67,500
Machine 4
45,000
Based on your further inquiry and verification, you noted the following:
1. Machine 5 was purchased for cash; it replaced Machine 1, which was sold on this date for P6,000.
2. Machine 2 was destroyed by the thickness of engine oil used leading to explosion on December 1, 2020. Machine 7
was to replace Machine 2.
3. Machine 3 was traded in for Machine 6 at an allowance of P24,000; the difference was paid in cash and charged to
Production Machine account.
4. Depreciation rate is recognized at 25% per annum.

Definition Video Definition Accounting method wherein the cost of a tangible asset is spread over the asset's useful life. Depreciation usually denotes how much of the asset's value has been used up and is usually considered an operating expense. Depreciation occurs through normal wear and tear, obsolescence, accidents, etc. Video

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