1).On January 1, 2021 the Emming Corporation purchased some machinery. The machinery has an estimated life of 10 years and an estimated residual value of P5, 000. The depreciation on this machinery was P20,000 in 2023.

Required

Compute the acquisition cost of the equipment under the following depreciation methods:

1.Straight-line

2.Sum-of-the-years'-digits

3.Double-declining-balance

2).The Loban Company purchased four cars for P 9,000 each, and expects that they would be sold in three years for P1,500 each. The company uses group depreciation on a straight- line basis.

Required

1.Prepare journal entries to record the acquisition and the first year's depreciation.

2.If one of the cars is sold at the beginning of the second year for P 7,000, what journal entry is required?

3).The Wilcox Company acquires four machines that have the following characteristics:

Machine Cost Estimated Residual Value Estimated Service Life

A P26,000 P2,000 6 years

B 19,000 1,000 9

C 30,000 5,000 5

D 28,000 - 7

Required

1.Prepare journal entries to record the acquisition and the first year's depreciation, assuming that the composite method is used on a straight-line basis.

2.If the company sells machine B after four years for P 10,000 prepare the journal entry.

4).On May 10, 2021, the Horan Company purchased equipment for P 25,000. The equipment has an estimated service life of five years and zero residual value. Assume that straight- line depreciation is used.

Required

Compute the depreciation for 2021 for each of the following four alternatives:

1. The company computes depreciation to the nearest day. (Use 12 months of 30 days each.)

2.The company computes depreciation to the nearest month. Assets purchased in the first half of the month are considered owned for the whole month.

3.The company computes depreciation to the nearest whole year. Assets purchased in the first half of the month are considered owned for the whole year.

4.The company records one-half year's depreciation on all assets purchased during the year.

5).On January 1, 2022, the Vallahara Company purchased machinery for P 650,000 which it installed in a rented factory. It is depreciating the machinery over 12 years by the straight-line method to a residual value of P 50,000. Late in 2026, because of increasing competition in the industry, the company believes that its asset may be impaired and will have a remaining useful life of five years, over which it estimates the asset will produce total cash inflows of P 1,000,000 and will incur total cash outflows of P 825,000. The cash flows are independent of the company's other activities and will occur evenly each year. The company is not able to determine the fair value based on a current selling price of the machinery. The company's discount rate is 10%.

Required

1.Prepare schedules to determine whether, at the end of 2022, the machinery is impaired and, if so, the impairment loss to be recognized.

2.If the machinery is impaired, prepare the journal entry to record the impairment.

6).The Bailand Company purchased a building for P 210,000 that had an estimated residual value of P10,000 and an estimated service life of 10 years. The company purchased the

building four years ago and has used straight-line depreciation. At the beginning of the fifth year (before it records depreciation for the year), the following independent situations occur:

1.The company estimates that the asset has eight years' life remaining (for a total of 12 years).

2.The company changes to the sum-of-the-years'-digits method.

3.The company discovers that the estimated residual value has been ignored in the computation of the depreciation.

Required:

For each of the independent situations, prepareall the journal entries relating to the building for the fifth year. Ignore income taxes.

7). The Fairy Company purchased a site for limestone quarry for P 100,000 on January 2, 2020. It estimates that the quarry will yield 400,000 tons of limestone. It estimates that its retirement obligation has a fair value of P 20,000 after which the land can be sold for P 10,000. In 2020, 80,000 tons were quarried and 60,000 tons sold. Cost of production (excluding depletion) are P4 per ton.

Required:

a.Compute the depletion cost per ton.

b.Compute the total cost of inventory at December 31, 2020.

c.Compute the total cost of goods sold for 2020.

8). Cooler Company acquired a tract of land containing an extractable natural resource. Cooler is required by the purchase contract to restore the land to a condition suitable for recreational use after it has extracted the natural resource. Geological surveys estimate that the recoverable reserves will be 5,000,000 tons and that the land will have of P1,000,000 after restoration. Relevant cost information as follows:

LandP 9,000,000

Estimated restoration costs1,500,000

If Cooler maintains no inventories of extracted material, what should be the depletion expense per ton of extracted material?

9). On January 2, 2020, the Wally Company purchased land for P 450,000, from which it is estimated that 400,000 tons of ore could be extracted. It estimates that it will cost P 80,000 to restore the land, after which it could be sold for P 30,000. During 2020, the company

mined 80,000 tons and sold 50,000 tons. During 2021, the company mined 100,000 tons and sold 120,000. At the beginning of 2022, the company spent additional P 100,000, which increased the reserves by 60,000 tons. In 2022, the company mined 140,000tons and sold 130,000 tons. The company uses a FIFO cost flow assumption.

Required:

a.Calculate the depletion included in the income statement and ending inventory for 2020, 2021 and 2022.

10).The Befort Company field for a patent on a new type of machine. The application costs totaled P12,000. R&D costs incurred to create the machine were P75,000. In the year in which the company filed for and received the patent, it spent P20,000 in the successful defense of a patent infringement suit.

Required

1.At what amount should the company capitalize the patent?

2.How would you determine the economic life of the patent?

11).On January 4, 2021, the Franc Company purchased for P27,000 a patent that had been filed eight years earlier. The patent covers a manufacturing process that the company plans to use for 15 years. On January 3, 2022, the company paid its lawyer P10,000 for successfully defending the patent in a lawsuit.

Required

Prepareall the journal entries associated with the patent in 2021 and 2022.

12).On January 11, 2022, The Hughes Company applied for a tradename. Legal costs associated with the application were P20,000. In January 2023, the company incurred P8,000 of legal fees in a successful defense of its tradename. The tradename was not impaired in 2022 and 2023.

Required

Compute the ending carrying value of the tradename for 2022 and 2023. Should the company amortize the tradename?

13).The KLK Clothing Company manufactures professionals clothing for women. In order to keep costs low while still producing quality clothes, KLK conducts many research and development projects. On a current project KLK researchers used P35,000of cotton and P27,000 of wool from its inventory. KLK paid its researchers P30,000 in wages and purchased a special weaving machine for P60,000 cash. The machine was not suitable for use in production activities and was not expected to be used in other research projects. In addition, depreciation of the project's research lab amounted to P20,000.

Required

Prepare the journal entry to record KLK's research and development costs.

14).In 2020, Lalli Corporation incurred R&D costs as follows:

Materials and equipmentP100,000

Personnel 100,000

Indirect costs 50,000

P250,000

These cost relate to a product that will be marketed in 2021. The Company estimates that these costs will be recouped by December 31, 2024.

Required

What is the amount of R&D costs expense in 2020?