On January 1, 1978, the purchasing engineer of a Cement Co. purchased a new machine at a cost of P140,000. Depreciation has been computed by the straight-line method based on an estimated useful life of five years and residual scrap value of P12,800. On January 2, 1981, extraordinary repairs (which were almost equivalent to a rebuilding of the machinery) were performed at a cost of P30,400. Because of the thorough going nature of these repairs, the normal life of the machinery was extended materially. The revised estimate of useful life was four years from January 1, 1981. Determine the annual provisions for depreciation for the years 1978 to 1980 and the adjusted provision for depreciation on December 31, 1981. Assume payment in cash for the machine and extraordinary repairs.
On January 1, 1978, the purchasing engineer of a Cement Co. purchased a new machine at a cost of P140,000. Depreciation has been computed by the straight-line method based on an estimated useful life of five years and residual scrap value of P12,800. On January 2, 1981, extraordinary repairs (which were almost equivalent to a rebuilding of the machinery) were performed at a cost of P30,400. Because of the thorough going nature of these repairs, the normal life of the machinery was extended materially. The revised estimate of useful life was four years from January 1, 1981. Determine the annual provisions for depreciation for the years 1978 to 1980 and the adjusted provision for depreciation on December 31, 1981. Assume payment in cash for the machine and extraordinary repairs.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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Transcribed Image Text:On January 1, 1978, the purchasing engineer
of a Cement Co. purchased a new machine at a
cost of P140,000. Depreciation has been
computed by the straight-line method based
on an estimated useful life of five years
and residual scrap value of P12,800. On
January 2, 1981, extraordinary repairs
(which were almost equivalent to a
rebuilding of the machinery) were performed
at a cost of P30,400. Because of the
thorough going nature of these repairs, the
normal life of the machinery was extended
materially. The revised estimate of useful
life was four years from January 1, 1981.
Determine the annual provisions for
depreciation for the years 1978 to 1980 and
the adjusted provision for depreciation on
December 31, 1981. Assume payment in cash
for the machine and extraordinary repairs.
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