PROBLEM 3: Grisha Company owns a milling machine that cost P700,000 and has accumulated depreciation of P390,000 as of December 31. 2019. The machine was acquired on January 1, 2017. It has been depreciated over 5 years using the straight-line method. Estimated residual value is P50,000.The company decided to dispose the milling machine on July 1, 2020. Requirements: a) Compute the net book value of the machine at disposal date. b) Prepare the entry to record the disposal of the machine under each of the following indeþendent situations. 1. The machine needed extensive repairs, and it was not worth repairing. Grisha disposed of the machine, receiving nothing in return. 2. Grisha sold the machine for P280,000 cash. 3. Grisha exchanged its old machine to Ravka Inc. for a new machine. The fair value of the new machine is P178,000 while the fair value of the old machine is P190,000. Grisha receives additional P12,000 cash.
PROBLEM 3: Grisha Company owns a milling machine that cost P700,000 and has accumulated depreciation of P390,000 as of December 31. 2019. The machine was acquired on January 1, 2017. It has been depreciated over 5 years using the straight-line method. Estimated residual value is P50,000.The company decided to dispose the milling machine on July 1, 2020. Requirements: a) Compute the net book value of the machine at disposal date. b) Prepare the entry to record the disposal of the machine under each of the following indeþendent situations. 1. The machine needed extensive repairs, and it was not worth repairing. Grisha disposed of the machine, receiving nothing in return. 2. Grisha sold the machine for P280,000 cash. 3. Grisha exchanged its old machine to Ravka Inc. for a new machine. The fair value of the new machine is P178,000 while the fair value of the old machine is P190,000. Grisha receives additional P12,000 cash.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
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.
Topic Video
Question
100%
Transcribed Image Text:PROBLEM 3: Grisha Company owns a milling machine that cost P700,000 and
has accumulated depreciation of P390,000 as of December 31, 2019. The
machine was acquired on January 1, 2017. It has been depreciated over 5 years
using the straight-line method. Estimated residual value is P50,000.The company
decided to dispose the milling machine on July 1, 2020.
Requirements:
a) Compute the net book value of the machine at disposal date.
b) Prepare the entry to record the disposal of the machine under each of the following
indeþendent situations.
1. The machine needed extensive repairs, and it was not worth repairing. Gisha disposed
of the machine, receiving nothing in return.
2. Grisha sold the machine for P280,000 cash.
3. Grisha exchanged its old machine to Ravka Inc. for a new machine. The fair value of
the new machine is P178,000 while the fair value of the old machine is P190,000.
Grisha receives additional P12,000 cash.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 2 steps with 7 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education