Problem 30-1 (IAA)

Amicable Company purchased a machine at a cost. of P635,000 January 1, 2019. It was estimated that
the machine would have a residual value of P35,000.

cost of P685,000
The estimated useful life is 5 years, 60,000 service hours and 150,000 production units.

years, 60,000 service hours and

Actual operations Service hours Unit produced
2019 14,000 34,000
2020 13,000 32,000
2021 10,000 25,000
2022 11,000 29,000
2023 12,000 30,000

Required: Prepare a depreciation table for the following methods:

a. Straight line
b. Service hours
c. Production method

Problem 30-2 (IAA)

Austere Company purchased machinery for P570,000 on July 1, 2019. It is estimated that it will have
useful life of 10 years, residual value of P20,000, production of 200,000 units and working hours of
50,000.

The entity used the machinery for 3,000 hours in 2019 and 5,000 hours in 2020.

The machinery produced 18,000 units in 2019 and 22,000 units in 2020.

Required:

Compute depreciation for 2019 and 2020:

a. Straight line
b. Working hours
C. Output method

Problem 30-3 (IAA)

At the beginning of current year, Definite Company acquired the following assets:
Cost Residual Value Useful life
Machinery 310,000 10,000 5
Office equipment 110,000 10,000 10
Building 1,600,000 100,000 15
Delivery equip 430,000 30,0000 4

Required:

a. Compute the composite depreciation rate.

b. Compute the composite life.
C. Prepare journal entry to record the depreciation for the
current year.
Problem 30-4 (ACP)

Happy Company owned a power plant which consisted of the following assets all acquired at the
beginning of current year:

Cost Residual Value Useful life

Building 6,100,000 100,000 20
Machinery 2,550,000 50,000 5
Equipment 1,030,000 30,000 10

Required:
a. Compute the composite rate.
b. Compute the composite life.
c. Prepare journal entry to record the depreciation for the current year following the composite
method
d. Prepare journal entry to record the retirement of the machinery at the end of the fifth year
assuming the proceeds from retirement amount to P40,000.
e. Prepare journal entry to record the depreciation for the sixth year following the composite method.

Problem 30-5 (AICPA Adapted)

At the beginning of current year, Love Company bought machinery under a contract that required a
down payment of P100,000, plus 24 monthly payments of P50,000 each, for total cash payments of
P1,300,000. The cash equivalent price of the machinery was P1,100,000.

The machinery has an estimated useful life of 10 years and estimated residual value of P50,000. The
entity used straight line depreciation.

What amount should be reported as depreciation of the

machinery for the current year?
a. 105,000
b. 110,000
C. 125,000
d. 130,000

Problem 30-6 (AICPA Adapted)

Parable Company revealed the following depreciation policy on machinery:

A full year depreciation is taken in the year of acquisition.

No depreciation is taken in the year of disposition.

The estimated useful life is five years.

The straight line method is used.

On June 30, 2019, the entity sold tor P2,300,000 a machine acquired in 2016 for P4,200,000. The
estimated residual value was P600,000.

What amount of gain on disposal should be recorded in 2019?

a. 140,000
b. 260,000
c. 620,000
d. 980,000
Problem 30-7 (AICPA Adapted)

Wishful Company used straight line depreciation for the property, plant and equipment which consist
the following at the end of each year: of the

2019 2020
Land 250,000 250,000
Building 1,950,000 1,950,000
Machinery and equipment 6,500,000 6,950,000
Accumulated depreciation 3,700,000 4,000,000

The depreciation expense for 2019 and 2020 was P500,000 and P550,000, respectively.

What amount was debited to accumulated depreciation during 2020 because of property, plant and
equipment retirement?
a. 400,000
b. 250,000
C. 200,000
d. 100,000

Problem 30-8 (AICPA Adapted)

Silent Company provided the following schedule of machinery:

Estimated Useful life
Total cost Estimated residual value Useful life
Machine A 550,000 50,000 20
Machine B 200,000 20,000 15
Machine C 40,000 ? 5

What is the composite life of the assets?

a. 13.3
b. 16.0
C. 18.0
d. 19.8

Problem 30-9 (IAA)

Norraine Company used the Composite method of depreciation based on a composite rate of 25%.

At he beginning of 2019, the total cost of equipment was P5,000,000 with a total residual value of
P600,000. The accumulated depreciation was P3,000,000 at that.time.

In January 2019, the entity purchased an equipment for P2,500,000 with no residual value.

At the end of 2019, the entity sold an equipment with an original cost of P1,000,000 and a residual
value of P200,000 for P350,000. This asset was acquired on January 1, 2017.

1. What is the depreciation for 2019?

a. 1,625,000
b. 1,875,000
c. 1,125,000
d. 975,000
2 What is the gain or loss from the derecognition of the asset on December 31, 2019?
a. 100,000 gain
b. 150,000 loss
C. 50,000 loss
d. 0

Problem 30-10 (IFRS)

Meager Company purchased a machinery with a useful life of 10 years on January 1, 2019 for
P6,500,000.

On December 31, 2019, the amount the entity would receive from the disposal of the asset if it was
already of the age and in the condition expected at the end of the useful life was estimated at
P700,000.

Inclusive of inflation the actual amount expected to be received on disposal was estimated at
P900,000.

What is the depreciation for the current year?

a 580,000
b. 650,000
C. 560,000
d. 0

Problem 31-1 (ACP)

Bitter Company acquired a machinery on April 1, 2019.

Cost1 200,000
Residual value 120,000
Estimated useful life 8 years

1. What is the depreciation for 2019 using sum of year’s digits?

a. 180,000
b. 240,000
C. 120,000
d. 160,000

2. What is the depreciation for 2020 using sum of year’s digits?

a. 157,500
b. 217, 500
c. 210,000
d. 105,000

3 What is the depreciation for 2019 using double declining balance?

a. 300,000
b. 150,000
C. 225,000
d. 202,500

4 What the depreciation for 2020 using double declining

balance?
a. 270,000
b. 135,000
C. 243,750
d. 150,000
Problem 31-2 AICPA Adapted)

January 1, 2019, Domino Company purchased a new machine for P4,O00,000. The new machine has
an estimated useful life of eight years and the residual value was estimated to be P400,000.

Depreciation was computed on the sum of the years' digits method.

What is the carrying amount of the machine on December 31, 2020?

a. 2,100,000
b. 2,500,000
C. 1,150,000
d. 3,300,000

Problem 31-3 (AICPA Adapted)

On January 1, 2017 Mogul Company acquired equipment to be used in the manufacturing operations.

The equipment has an estimated useful life of 10 years and an estimated residual value of P50,000.

The depreciation applicable to this equipment was P240,000 for 2019 computed under the sum of
years' digits method.

What was the acquisition cost of the equipment?

a. 1,650,000
b. 1,700,000
C. 2,400,000
d. 2,450,000

Problem 31-4 (AICPA Adapted)

On April 1, 2019, Kingdom Company purchased new machinery for P3,000,000. The machinery has an
estimated useful life of five years and depreciation is computed by the sum of years' digits method.

What is the accumulated depreciation of the machinery on March 31, 2021?

a. 1,920,000
b. 1,800,000
C. 1,200,000
d. 1,000,000

Problem 31-5 (AICPA Adapted)

Sarcastic Company takes a full depreciation expense in the year of acquisition, and no depreciation
expense in the year of disposition. An asset was acquired in 2016.

Cost 1,100,000
Residual value 200,000
Accumulated depreciation-January 1, 2019 72,000
Estimated useful life 5 years

Using the same method in 2016, 2017 and 2018, what depreciation expense should be recorded in
2019?
a. 120,000
b. b. 180,000
C. 220,0000
d. 240,000
Problem 31-6 (AICPA Adapted)
Iceberg Company purchased equipment which was installed and put into service January 1, 2019 at a
total cost of P1,280,000.

Residual value was estimated at P80,000.

The equipment is being depreciated over eight years by the double declining balance method.

What amount of depreciation should be recorded for 2020?

a. 225,000
b. 240,000
C. 300,000
d. 320,000

Problem 31-7 (IAA)

On January 1, 2019, Contour Company acquired an equipment to be used in operations. 'The
equipment has a useful life of 8 years and residual value of P300,000.

The depreciation applicable to the equipment was P900,000 for 2020 computed under the double
declining balance method.

What was the acquisition cost of the equipment?

a. 3,600,000
b. 4,500,000
C. 4,800,000
d. 5,100,000

Problem 31-9 (AICPA Adapted)

Tarnish Company purchased equipment on January for P5,000,000. The equipment had an estimated
5-year useful life. The accounting policy for 5-year assets is to use the 200% double declining balance
method for the first two years of the asset's life and then switch to straight line depreciation

On December 31, 2021, what amount should be reported as accumulated depreciation?

a. 3,000,000
b. 3,800,000
c. 3,920,000
D. 4,200,000

Problem 31-10 (IAA)

Saga Company purchased a machinery on January 1, 2016 for P7,200,000. The machinery had useful
life of 10 years with no residual value and was depreciated using the straight line method.

In 2019, a decision was made to change the depreciation method from straight line to sum of years'
digits. The estimate of useful life and residual value remained unchanged.

What is the depreciation for the current year?

b. 1,260,000
1,440,000
C. 916,360
d. 720,000

Problem 31-11 (AICPA Adapted)

On January 1, 2017, Bride Company purchased for P2,400.000 a machine with a useful lite of ten years
and no residual value. The machine was depreciated by the double declining balance method. The
entity changed to the straight line method on January 1, 2019.
What is the depreciation for the current year?
a. 153,600
b. 192,000
C. 240,000
d. 207,200

problem 31-12 (IAA)

On January 1, 2019, Layman Company purchased personal compute or P6,000,000. The management
estimated that the computers would last approximately 4 years with residual
Value of P600,000. The entity used the double declining method.

During January 2020, the management realized that technological advancement had made the
computers virtually obsolete and proposed changing the remaining useful life to 2 years.

what amount of depreciation should be recognized for 2020?

a. 3,000,000
b. b. 2,400,000
C. 1,500,000
d. 1,200,000

Problem 31-13 (IAA)

Spiderman Company purchased a machine on January 1, 2016 for P3,760,000. 'The machine was
estimated to have a useful life of five years and a residual value of P240,000. The entity used the sum
of years' digits method of depreciation.

At the beginning of 2019, the entity determined that the total useful life of the machine should have
been four years and the residual value is P352,000.

What amount should be recorded as depreciation for 2019?

a. 192,000
b. 444,000
C. 592,000
d. 704,000

Problem 31-14 (IAA)

Superman Company acquired a machine on January 1, 2017 for P10,000,000. The machine had an 8-
year useful life with a P1,000,000 residual value and was depreciated using the sum of years' digits
method. In January 2019, the entity estimated that the asset's useful life from the date of acquisition
should have been 6 years and the residual value is P400,000.

What is the accumulated depreciation on December 31,

2019?
a. 5,212,500
b. 6,090,000
C. 4,400,360
d. 6,250,000