1. The adjusting entry to correct the entry made on trade-in of Machine 3 will include aa. Debit to Accumulated Depreciation P67,500b. Debit to Loss on Exchange P58,500c. Credit to Production Machine P67,500d. Credit to Cash P192,0002. The total depreciation for the year ended December 31, 2020 isa. P237,000 c. P233,250b. P232,500 d. P236,2503. The carrying amount of production machine as of December 31, 2020 isa. P1,024,500 c. P1,069,500b. P1,029,000 d. P 990,750 In the audit of the books of Yellow Corporation for the year 2020, the following items and information appeared in theProduction Machine account of the client:Date01/01ParticularsBalance-Machine 1, 2, 3, and 4 atP180,000 eachDebitCreditP 720,00002/28Machine 5396,000Machine 1P 6,00009/0112/01Machine 6192,000432,000Machine 7The Accumulated Depreciation account contained no entries for the year 2020. The balance on January 1, 2020 per youraudit, was as follows:Machine 1P168,750Machine 278,750Machine 367,500Machine 445,000Based 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 7was 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 toProduction Machine account.4. Depreciation rate is recognized at 25% per annum.

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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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1. The adjusting entry to correct the entry made on trade-in of Machine 3 will include a
a. Debit to Accumulated Depreciation P67,500
b. Debit to Loss on Exchange P58,500
c. Credit to Production Machine P67,500
d. Credit to Cash P192,000

2. The total depreciation for the year ended December 31, 2020 is
a. P237,000 c. P233,250
b. P232,500 d. P236,250

3. The carrying amount of production machine as of December 31, 2020 is
a. P1,024,500 c. P1,069,500
b. P1,029,000 d. P 990,750

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:
Date
01/01
Particulars
Balance-Machine 1, 2, 3, and 4 at
P180,000 each
Debit
Credit
P 720,000
02/28
Machine 5
396,000
Machine 1
P 6,000
09/01
12/01
Machine 6
192,000
432,000
Machine 7
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.

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