2-18.

The Tan Company purchased equipment on April (b) What was the gain or loss on the sale of the
1, 2019 for P800,000. The equipment has the following equipment in 2022, assuming that Citi used the
data: straight-line method of depreciation and had the policy
Estimated service life of computing depreciation to the nearest full month?
- 8 years 2-22. The Asiaplus Corporation received on Januaryplus
100,000 hours type of equipment, built by the supplier to Asiaplus' The
Estimated residual value equipment is comprised of the following components:
P80,000 specifications.
900,000 units of output Component Cost Estimated Estimated
During 2019 and 2020, the company used the machine Residual Life
for 5,000 and 6,000 hours, respectively, and produced Value
45,000 and 64,000 units, respectively. 1 P82,000 P2,000 10 years
REQUIRED: 2 33,000 3,000 6 years
Determine the following: 3 22,000 1000 7 years
(a) Depreciation charge for 2019 and 2020 under each 4 18,000 2000 5 years
of the following methods: Component 4 was replaced on December 31, 2022, the
1. Straight-line company incurring P20,000 on the new part. The
2. Hours worked company realized net proceeds of P5,000 on the sale of
4. Sum-of-the-years' digits component 4. The new part is expected to last for 5
3. Units of output years with no estimated scrap value.
5. Double declining balance REQUIRED:
6. 150% declining balance Give entries for
(b) Carrying amount of the asset at the end of 2020 (a) Depreciation of the equipment for the year ended
under each of the above methods of depreciation. December 31, 2019
2-19. De Oro Company purchased an equipment for (b) Sale of component 4 at December 31, 2022
P340,000 at the beginning of the year. The equipment (c) Replacement of component 4
has an expected residual value of P20,000. The (d) Depreciation of the equipment for the years 2022
depreciation expense for the first two years of the asset and 2023
use are shown overleaf under three alternative
methods: 2-23. Total Company purchased an equipment for
P1,200,000 that had an estimated residual value of
Year Method 1 Method 2 Method 3 P100,000 and an estimated service life of 10 years. The
1 80000 P128,000 P127,500 asset is being depreciated using the straight- line
2 80000 96,000 79,688 method.
REQUIRED: REQUIRED:
(a) Identify the three depreciation methods.
(b) Compute the expense for the 3rd year under the What is the amount of depreciation expense for the
three methods. fifth year under each of the following independent
2-20. The Real Company acquired a plant asset at the accounting changes?
beginning of 2019. The asset has an estimated life of 5
years. The following table shows the correct amounts of
depreciation under straight-line (SL), sum-of-the-years' (a) The company changes to the sum-of-the-years'
digits (SYD), and double declining balance (DDB) digits method, but there is no change in the expected
methods. residual value. and
Year SL SYD DDB
1 12,000 P20,000 P26,400 (b) The asset's remaining useful life is revised to 5 years,
2 12,000 16,000 15,840 residual value is reduced to P60,000. of
3 12,000 12,000 9,504
4 12,000 8,000 5,702 (c) It was estimated that the asset should be useful for a
5 12,000 4,000 2,554 total 8 years from the date of acquisition, without
REQUIRED: Determine the following: residual value.
(a) Cost of the machine
(b) Salvage value of the machine 2-24. Standard Company purchased a machine on
(c) If the machine is sold at the end of the year 3, which January 1, 2019 for P500,000. At the time, it was
method will yield the highest gain on disposal of the determined that the machine had an estimated useful
asset? life of 10 years and an estimated residual value of
2-21. Citi Company purchased factory equipment on P20,000. The company used the double-declining
March 10, 2019. The company accountant revealed the balance method of depreciation. During 2022, the
following information regarding this asset: Purchase company decided to change its depreciation method to
price - P1,600,000; Residual value 100,000; Estimated straight line, at which time, the machine's remaining
useful life - 8 years. useful life was estimated to be 5 years, including the
The equipment was sold on November 30, 2022 for current year, with a residual value at the end of useful
P300,000. life of P10,000.
REQUIRED:
(a) What amount should Citi record as depreciation REQUIRED:
expense for the year ended December 31, 2019 using
double-declining balance method, assuming the What is the depreciation expense for the machine for
company had the policy of recording half year the year 2023?
depreciation in the year of acquisition?
2-25. Carmi Company purchased Machine No. 4 on
August 1, 2019 for a cash price of P360,000. Installation
costs of P18,000 were also paid. Carmi estimated the
useful life and residual value at 5 years and P35,000,
respectively.
On August 1, 2021, Carmi paid P80,000 to overhaul
Machine No. 4, after which the useful life of Machine
No. 4 was estimated to have been extended by two
years and its residual value increased to P50,000.
REQUIRED:
(a) What should be the depreciation expense on this
machine for the year ended December 31, 2021?
(b) What is the asset's carrying value at December 31,
2022?
2-26. On January 1, 2019, Chu, Inc. purchased a
machine for P528,000 and depreciated it by the
straight-line method using an estimated useful life of
eight years with no salvage value. During 2023, Chu
determined that the machine had a useful life of six
years from the date of acquisition. An accounting
change was made in 2023 to reflect these additional
data.
REQUIRED:
What is the accumulated depreciation balance of this
machine at December 31, 2023?
2-27. At the beginning of 2018, Imaculada Company
purchased machine costing P1,000,000. The machine is
expected to be usefu for a total of 10 years, at the end
of which, it is expected to be scrapped. On July 1, 2023,
the company replaced the engine block of the machine
at a cost of P320,000. This replacement is expected to
reduce the operating cost of the machine during its
extended useful life of 10 years from the date of
replacement. REQUIRED:
Give the entries to record the replacement and the
year-end depreciation, assuming
(a) The old part had a cost of P250,000.
(b) The cost of the old part is not reliably determinable,
and the the new engine block was very much identical
to the replaced part.
2-28. On January 1, 2016, the Remedios Company
leased a portion of the building owned by Royal
Commercial Company. The lease expires on. December
31, 2025. Extensive work was done on the leased
property for the construction of the staff working area.
The improvements, costing P1,200,000, were
completed on March 31, 2016. The estimated useful life
of the improvement was 12 years.
During 2020, because of favorable business operations
in the area Remedios Company negotiated for the
extension of the lease term by an additional 5 years.
Remedios Company provides full year depreciation
during the year of acquisition and no depreciation in
the year of disposal.
REQUIRED:
(a) Compute the carrying value of the leasehold
improvements of December 31, 2019.
(b) Compute the depreciation expense improvements
for the year ended December 31, 2020. on the
leasehold
2-29. At the beginning costing P860,000. of 2016, Joice
Company acquired an equipment The equipment was
believed to have an estimated useful life of 9 years and
a residual value of P50.000 The company uses straight-
line depreciation for this type of equipment.
At December 31, 2019, because circumstances indicate
that the economic performance of the asset is less than
expected, the equipment was tested for impairment.
The asset's selling price on this date was estimated to
be P450,000, after incurring P30,000 cost to sell. The
asset is expected to provide annual net cash inflow of
P100,000, during the remaining five year useful life, at
the end of which residual value is expected to be only
P20,000.
Based on current market assessments and risks specific
to the asset, a discount rate of 10% is considered
appropriate.
REQUIRED:
(a) What is the asset's recoverable amount at
December 31, 2019?
(b) What amount of impairment loss should Joice
Company recognize for the year ended December 31,
2019?
(c) How much depreciation expense should Joice
Company recognize for the year ended December 31,
2020?
2-30. Presented below is information related to
equipment owned by Island Souvenirs, Inc.:
Cost P9,000,000
Accumulated depreciation 1,500,000
Fair value less cost to sell 3,200,000
Island Souvenirs will continue to use the asset for its
remaining 5 year life, at the end of which it is expected
to be sold at P500,000.
Expected cash inflows from the use of the asset is
P1,500,000, after incurring production costs including
annual maintenance of P700,000. Appropriate discount
rate is 10%
REQUIRED:
(a) What is the equipment's value in use?
(b) How much impairment loss, if any, shall be
recognized on this asset?
(c) What is the revised annual depreciation after
recording impairment loss?
2-31. In January 2017, Lu Company purchased
machinery voting P500,000. The machinery has an
estimated residual value of P50,000 and an estimated
useful life of eight years. The asset is being depreciated
using the straight-line basis. At December 31, 2019, it
became apparent that the machine suffered permanent
impairment in value. determined It was recoverable
value was P200.000 with a remaining life of two ye and
a residual value of P20,000.
REQUIRED:
Prepare journal entries to record the the repent for 201
Prepare jourss on December 31, 2019, and the
depreciation exper for the year ended December 31,
2020.
2-32. A building owned by Twin Head Corporation had
suffer A building in value, and an impairment loss of
P2,400,000 impairment by the company on Decembers
of the win recognition of impairment, the ledger
accounts of the Twin He showed the following balances
at December 31, 2017:
Building 10000000
Accumulated Depreciation 4400000
The building was originally estimated to have a useful
life of twenty years when acquired on January 1, 2014.
Depreciation was computed using straight-line method.
The company measures al buildings it owns using the
cost model.
The company had the intention of occupying the
building for its remaining useful life of 16 years.
On December 31, 2019, there were objective evidences
of recovery the value of the building, owing to the
flourishing business in the area in which the building is
located and increased marketability of Twin Head's
products. The building had an estimated useful life d 14
years on this date.
The asset's recoverable amount at December 31, 2019
2 P7,500,000.
REQUIRED:
(a) Compute depreciation expense for years 2018 and
2019.
(b) result of the appropriate entry at December 31,
2019 as the foregoing.
(c) What is the asset's carrying amount after the
recovery of December 31, 2019?
(d) How much should Twin Head recognize expense for
the year ended December 31, 2020? as depreciation
expense for the year ended December 31,2020.
2-33. On January 1,2017, Coco Company acquired a
factory equipment at a cost of P300,000. The
equipment being depreciated using the straight-line
method over its projected useful life of 10 years. On
December 31, 2018, a determination was made that the
asset's recoverable amount was only P192,000. On
December 31, 2019, the assets recoverable amount was
determined to be P222,000 and management believes
that the impairment loss previously recognized should
be reversed.
REQUIRED:
(a) How much impairment loss should be recognized on
December 31, 2018?
(b)What is the asset's carrying value on December 31,
2019?
(c) How much impairment recovery should be reported
in 2019?
2-34. On January 1, 2017, an item of equipment with
cost of P4,000,000 and accumulated depreciation of
P1,600,000 was revalued to have a fair market value of
P3,600,000 and a remaining useful life of six years. The
company adopts the policy of reporting this item of
property, plant and equipment at revalued amount less
any subsequent accumulated depreciation and
subsequent impairment losses.
The company restates its accumulated depreciation
proportionately with the change in the gross carrying
amount of the asset and transfers a portion of the
surplus as the asset is being used by the entity. On
January 1, 2019, a second revaluation indicates that the
equipment had a fair value of P2,000,000.
REQUIRED: Prepare journal entries to record
(a) the revaluation on January 1, 2017;
(b) adjusting entries at December 31, 2017 and at
December 31, 2018;
(c) the revaluation on January 1, 2019; and
(d) adjusting entries at December 31, 2019.
2-35. On January 1, 2019, Samsung Company purchased
equipment This unit of incurring a total cost of
P3,600,000. belongs to a class carried by Samsung using
the revaluation model. Any resulting revaluation
surplus is periodically transferred to retained earnings
as the surplus is realized. Revaluation is recorded
maintaining the proportionate relationship between
the asset account and accumulated depreciation.
Depreciation is consistently provided on the equipment
based on the original estimated useful life of 10 years.
The company revalues this unit every two years. The
results of the revaluation are as follows:
Date of revaluation Revalued amount
December 31, 2020 P3,120,000
December 31, 2022 2,010,000
December 31, 2024 1,800,000
REQUIRED:
Give all entries relating to this equipment from January
1, 2019 through December 31, 2025.
2-36. Lakers, Inc. purchased a machinery on January 1,
2019, at a cost of P1,000,000. It is being depreciated
using the straight-line method over its projected useful
life of 10 years. At December 31, 2019, the asset's fair
value was P1,125,000. Accordingly, an entry was made
on that date to recognize the revaluation surplus. It is
the company policy to transfer a portion of revaluation
surplus to retained earnings every period.
An impairment was detected on December 31, 2021
and the recoverable amount of the asset was
determined to be P673,750. At December 31, 2022, the
fair value of the asset was determined to be P730,000.
REQUIRED:
(a) What amount of revaluation surplus should be
credited directly to equity on December 31, 2019?
(b) What is the amount of impairment loss to be
reported by Lakers on December 31, 2021?
(c) How much is recognized as revaluation surplus on
December 31, 2022?
2-37. Allied Company sought to increase reserves of a
special mineral resource. During 2017, the company
purchased a piece of property that was expected to
retain some value after removal of the mineral
resources was complete. Company records reveal the
following:
In the year 2017:
Purchase price of property P 4,450,000
Estimated supply of mineral resource 3,500,000 tons
Estimated property value after removal
of mineral resource P 650,000
Total resource removal this year 0 tons
In the year 2018:
Capitalized development costs P 750,000
Total resource removal this year 0 tons
In the year 2019:
Total resource removal this year 550,000
tons
In the year 2020:
Estimated total resources to be 3660000 tons
recovered in future years (based on
new discoveries)
Additional capitalized development costs P 961,000
Total resource removal this year 700,000
tons
REQUIRED:
What are the amounts of depletion expense for 2019
and 2020?
2-38. Ong Exploration Company purchased in 2018 a
property that contained certain mineral deposits for
P45,000,000. Estimated recovery was 10,000,000
metric tons of deposits. Development costs of
P1,500,000 were also incurred in the same year, and
these were properly capitalized by the company. The
mining property was expected to be worth P6,000,000
after the mineral deposits had all been removed, but
will require restoration costs of P2,500,000. Based on
the assessment of the company at the end of 2018, the
extraction of resources from the site will last up to
December 31, 2028. The company established a
provision for restoration, discounting the expected
restoration costs at the prevailing interest rate of 8%.
During 2019, the company extracted and sold 1,000,000
metric tons of mineral. Further development costs of
P750,000 were incurred and capitalized in 2020, and
the estimate of total recoverable deposits (including
the amount extracted in 2019) was revised to 9,250,000
metric tons. recovered 1,500,000 metric tons. During
2020, the company recovered 1,500,000 metric tons.
REQUIRED:
Determine the depletion expense for 2019 and 2020.
(Round off unit depletion rate to the nearest centavo
and round off final total depletion expense to the
nearest peso)
2-39. On July 1, 2019, Family Mining Company
purchased a coal mine for P4 million. The estimated
capacity of the mine was 1,400,000 tons. During 2019,
the company mines 20,000 tons of coal per month and
sells 18,000 tons of coal per month. The selling price is
P60 per ton, and production costs (excluding depletion
and depreciation) are P8 per ton. At the end of the
mine's life, it is expected that it will cost P400,000 to
restore the land, after which it can be sold for
P200,000.
The company also purchased temporary housing for the
miners at a cost of P300,000. The housing has an
expected life of 10 years but it is expected to be sold for
P20,000 at the end of the mine's life. In 2020, after the
financial statements for 2019 have been issued, a new
estimate indicated that the capacity of the mine was
only 800,000 tons at the beginning of the year.
REQUIRED:
Determine the following:
(a) Cost of ending inventory for 2019
(b) Cost of goods sold for 2019
(c) Revised depletion and depreciation rate per ton in
2020
2-40. Dungeon Mining constructed a building costing
P7,500,000 on a mine property. The building has an
estimated useful life of twelve years with no residual
value. After all the resources are removed, the building
will be of no use and will be demolished by the entity.
The estimated recoverable output from the mine is
1,000,000 tons.
During the first two years, the company extracted
100,000 tons per yeat changes in the surrounding
envirextracted 100,000 tonity to shut down its
operation for the succeeding two years. Thus, there
year, the extractions during the third and four years. In
the fifth with the company resumed extractions and
proh year. 50,000 tons the company induction
methods, it suced spected that the company will
extract 150,000 tons per year.
REQUIRED:
Determine the following:
(a) Depreciation expense for the first two years
(b) Carrying value of the building at the end of fourth
year from the date of acquisition of the building
(c) Depreciation expense for the fifth year
(d) Carrying value of the building at the end of sixth
year from the date of acquisition
2-41. The property, plant, and equipment section of the
statement of financial position at December 31, 2018 of
Yap Machine Shop appears as follows:
Land P
800,000
Building P1,500,000
Less Accumulated Depreciation 450,000
1,050,000
Equipment P 700,000
Less Accumulated Depreciation 400,000
300,000 Total P2,150,000
Because of good business conditions, the company
decided to move to a more strategic location.
Transactions on the transfer of location during 2019 are
described below:
1. The land and building on the old site were sold for
P1,700,000.
2. Equipment with a depreciated value of P150,000 Transactions during 2019 and other information are as
(original cost P400,000) was sold for P120,000. follows:
3. New equipment with an invoice price of P300,000
was purchased. A 2% discount was allowed. Delivery of a.On January 2, 2019, Pat purchased a new car for
the equipment to the site was P1,000 paid to the hauler P200,000 cash and trade-in of a two-year-old car with a
and P3,000 was spent for installation. cost of P180,000 and a book value of P54,000. The new
4. The land where the company moved in was given by car has a cash price of P240,000; the market value of
an associate of the company president as a gift. It had the trade-in is not known.
an appraised value of P8,000,000. However, the b.On April 1, 2019, a machine purchased for P230,000
company paid to the BIR P200,000 for taxes on the gift. on April 1, 2013, was destroyed by fire. Pat recovered
5. An old building on the land had to be demolished and P155,000 from its insurance company
the company paid P240,000 on this. c.On May 1, 2019, costs of P1,680,000 were incurred to
6. A new equipment with an invoice cost of P150,000 improve leased office premises. The leasehold
was A new equipment company paid P103,000 cash improvements have a useful life of eight years. The
and was granted a trade-in allowance of P47,000 related lease terminates on December 31, 2025.
equipment which had a depreciation of P15,000. cost of d.On July 1, 2019, machinery and equipment were
P40,000 and on a used accumulated purchased at a total invoice cost of P2,800,000;
7. Yap constructed a new building at its new site for additional costs of P50,000 for freight and P250,000 for
P28,000,000. installation were incurred.
e.Pat determined that the automotive equipment
REQUIRED: comprising the P1,150,000 balance at January 1, 2019,
(a) Prepare journal entries to record the above would have been depreciated at a total amount of
transactions. P180,000 for the year ended December 31, 2019.
(b) What is the net amount of the property, plant and
equipment after considering all the given transactions? REQUIRED:
(Phil. CPA Adapted) (a) Compute the depreciation expense that would
appear on Pat's statement of comprehensive income
2-42. Information pertaining to Pat Corporation's for the year ended December 31, 2019.
property, plant, and equipment for 2019 is presented (b) Compute the total gain or loss from disposal of
below: assets that would appear in Pat's statement of
comprehensive income for the year ended December
Account balances at January 1, 2019: 31, 2019.
(Phil. CPA Adapted)
Debit Credit
Land P 1,500,000
Buildings 12000000
Accum. P2,631,000
Depreciation -
Buildings
Machinery and 9,000,000
Equipment
Accumulated 2,500,000
Depreciation -
Machinery &
Equipment
Automotive 1,150,000
Equipment
Accumulated 846,000
Depreciation -
Automotive
Equipment

Depreciation data:
Depreciation Useful Life
Method
Buildings 150% declining- 25 years
balance
Machinery & Straight-line 10 years
Equipment
Automotive Sum-of-the-years- 4 years
Equipment digits
Leasehold Straight-line -
Improvements

The salvage values of the depreciable assets are

immaterial. Depreciation is computed to the nearest
month.