Module – 5

Activities/Assessment

Assignment 1.

At December 31, 2018, Kelson Corp.’s noncurrent operating asset and accumulated depreciation accounts had
balances as follows:

Cost Acc. Dep. Dep. Method Life

Land P390,000
Building 3,600,000 726,000 150% declining 25 years
Machinery and
Equipment 2,325,000 588,600 Straight Line 10
Delivery Equipment
396,000 258,600 150% declining 5
Leasehold
Improvements 663,000 331,500 Straight Line 8

Depreciation computed to the nearest month and the residual values of the depreciable assets considered immaterial.

The following transactions occurred in 2019:

a. On January 6, a facility, which included a land and a building structure, acquired from Wayde Corp. for P1, 800,
000. The land had a market value of P360, 000.

b. On April 6, the construction of parking lots, streets and sidewalks completed at the acquired facility. The
company incurred a total cost of P576, 000 on this project. This expenditure had estimated useful life of 12 - years
and depreciable using the straight-line method.

c. The leasehold improvements completed on December 31, 2015, and had an estimated useful life 8 years. The
related lease would have expired on December 31, 2021. During the current year however, the lessor has manifested
that the lease agreement was now renewable for an additional 5 - year term. It is very likely that Kelson Corp. will
be taking advantage of this renewal option.

d. On July 1, machinery and equipment purchased at a total invoice cost of P750, 000. Additional cost of P30, 000
and P90, 000 for installation incurred.

e. On August 30, Kelson purchased a new truck for P45, 000.

f. On September 30, a truck with a cost of P72, 000 and a carrying value of P24, 300 on the date of sale sold for P34,
500. Depreciation for the 9 month ended September 30, 2019 was P7, 056.

g. On December 20, a machine with a cost of P51, 000 and a carrying amount of P8, 925 at date of disposition
scrapped without cash recovered.

Requirements:

What are the depreciation expenses for the following?

1. Building

Acquired from Wayde Corp. 1,800,000

 Cost 3,600,000
Less: Accumulated Depreciation (726,000)
Total 4,674,000
Multiply by X 150 %
Amount 7,011,000
Divided by useful life / 25 years
Total Depreciation Expense P280,440

2. Land Improvement

Cost 360,000
Less: Acquired Facility, Parking lots, etc. (390,000)
Incurred Cost 576,000
Total 546,000
Divided by useful life / 12 years
Total Depreciation Expense P45,500

3. Machinery and equipment

Cost 2,325,000
Purchased at invoice cost 750,000
Additional Cost 30,000
Installation 90,000
Machine Cost (50,000)
Carrying amount (8,925)
Total 3,136,075
Acc. Dep. (588,600)
Total Acc. Dep 2,547,475
/ useful life / 10 years
Depreciation Expense 254,7470.5

4. Leasehold improvement

Cost 663,000
Less: Acc. Dep. (331,500)
Total 331,500
/ useful life / 13 years
Depreciation Expense 25,500

5. Delivery equipment

Purchase Truck 45,000

Cost 396,000
Cost of truck – CV (72,000 – 24,3000) 47,700
Sold the truck for (34,500)
Total 454,200
Acc. Dep. Sept. 30, 2019 (7,056)
Dep. Expense 447,144