Use the following information for the next eight questions:On July 1, 2019, Mega Company purchased a machinery for P900,000 and incurred freight and handlingcharges on the machinery while in transit amounting to P45,000. The company also incurred testing costsamounting to P20,000 and sold some salvaged materials from testing for P5,000. The machinery isestimated to have a useful life of 5 years and a residual value of P30,000. The entity depreciated itsmachineries using the double declining balance method.On July 1, 2020, Mega Company sold the machinery in exchange for a P50,000 down payment and a 3-year, P750,000 noninterest-bearing note receivable due as follows:DateAmountJan 1 20211125,000July 1 20212125,000Jan 1 20223125,000Jul 1 20224125,000Jan 1 2023125,000Jul 1 2023125,000P750,0006TotalThe prevailing rate for this type of note is 10%.Note: Round your final answers to two decimal places but do not round off while in the process of computingfor the answers. 18. What is the carrying amount of the machinery upon initial recognition?19. What is the carrying amount of the machinery immediately before the sale?20.How much is carrying amount of the note on July 1, 2020?21.How much is the gain or loss on sale of machinery? Place a minus sign if your answer is a loss.22. What is the carrying amount of the note as of December 31, 2020?23.How much is the current portion of the note on December 31, 2020?24.How much is the noncurrent portion of the note on December 31, 2020?25.How much is the total interest revenue to be earned over the term of the note?

Name: Use the following information for the next eight questions:On July 1,
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Description: Use the following information for the next eight questions:On July 1, 2019, Mega Company purchased a machinery for P900,000 and incurred freight and handlingcharges on the machinery while in transit amounting to P45,000. The company also incurred te

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On July 1, 2019, Mega Company purchased a machinery for P900,000 and incured freight and handling charges on the machinery while in transit amounting to P45,000. The company also incurred testing costs amounting to P20,000 and sold some salvaged materials from testing for P5,000. The machinery is estimated to have a useful life of 5 years and a residual value of P30,000. The entity depreciated its machineries using the double declining balance method. On July 1, 2020, Mega Company sold the machinery in exchange for a P50,000 down payment and a 3- year, P750,000 noninterest-bearing note receivable due as follows: Date Amount Jan 1 2021 125,000 July 1 2021 2 125,000 Jan 1 2022 3 125,000 Jul 1 2022 125,000 125,000 4 Jan 1 2023 Jul 1 2023 6 125,000 Total 9750,000 The prevailing rate for this type of note is 10%. Note: Round your final answers to two decimal places but do not round offwhile in the process of computing for the answers.

On July 1, 2019, Mega Company purchased a machinery for P900,000 and incured freight and handling charges on the machinery while in transit amounting to P45,000. The company also incurred testing costs amounting to P20,000 and sold some salvaged materials from testing for P5,000. The machinery is estimated to have a useful life of 5 years and a residual value of P30,000. The entity depreciated its machineries using the double declining balance method. On July 1, 2020, Mega Company sold the machinery in exchange for a P50,000 down payment and a 3- year, P750,000 noninterest-bearing note receivable due as follows: Date Amount Jan 1 2021 125,000 July 1 2021 2 125,000 Jan 1 2022 3 125,000 Jul 1 2022 125,000 125,000 4 Jan 1 2023 Jul 1 2023 6 125,000 Total 9750,000 The prevailing rate for this type of note is 10%. Note: Round your final answers to two decimal places but do not round offwhile in the process of computing for the answers.

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

Depreciation Methods

The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.

Depreciation Accounting

In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.

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18. What is the carrying amount of the machinery upon initial recognition?
19. What is the carrying amount of the machinery immediately before the sale?
20.How much is carrying amount of the note on July 1, 2020?
21.How much is the gain or loss on sale of machinery? Place a minus sign if your answer is a loss.
22. What is the carrying amount of the note as of December 31, 2020?
23.How much is the current portion of the note on December 31, 2020?
24.How much is the noncurrent portion of the note on December 31, 2020?
25.How much is the total interest revenue to be earned over the term of the note?

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