Case 3 JEREMY MANUFACTURING COMPANY's accounts at December 31, 201D, included the following balances: Machinery (at cost) P273,000 Accumulated depreciation - Machinery 144,600 Vehicles (at cost; purchased November 21, 201C) Accumulated depreciation - Vehicles 140,400 58,968 Land (at cost; purchased October 25, 201A) Building (at cost; purchased October 25, 201A) Accumulated depreciation - Building 243,000 557,160 85,842 Details of machines owned at December 31, 201D are as follows: Machine 1 2 Purchase Date Oct. 7, 201A Feb. 4, 201B Cost P129,000 144,000 Useful Life 5 years Residual Value P7,500 6 years 9,000 Additional information: Jeremy calculates depreciation to the nearest month and uses straight-line depreciation for all depreciable assets except vehicles, which are depreciated on the diminishing balance at 40% per annum. Jeremy's financial year-end is December 31. The vehicles account balance reflects the total paid for two (2) identical delivery vehicles, each of which cost P70,200. On acquiring the land and building, Jeremy estimated the building's useful life and residual value at 20 years and P15,000 respectively. The following transactions occurred from January 1, 201E: 201E January 3 June 22 07 Task Performance 1 Bought a new machine (Machine 3) for a cash price of P171,000. Freight charges of P1,320 and installation costs of P5,280 were paid in cash. The useful life and residual value were estimated at five (5) years and P12,000, respectively. Bought a second-hand vehicle for P45,600 cash. Repainting costs of P1,965 and four (4) new tires costing P1,035 were paid for in cash. *Property of STI Page 2 of 3 XSTI August 14 December 31 BM2008 Exchanged machine 1 for office furniture that had a fair value of P37,500 at the date of exchange. The fair value of machine 1 at the date of exchange was P34,500. The office furniture originally cost P108,000 and to the date of exchange, had been depreciated by P72,300 in the previous owner's books. Jeremy estimated the office furniture's useful life and residual value at eight (8) years and P1,620, respectively. Recorded depreciation. 201F April 30 May 25 June 26 December 31 201G January 5 June 20 October 4 December 31 Paid repairs and maintenance on the machinery amounting to P2,874. Sold one (1) of the vehicles bought on November 21, 201C for P19,800 cash. Installed a fence around the property at the cost of P18,000. The fence has an estimated useful life of 10 years and no residual value. (Debit the cost to a Land Improvements asset account) Recorded depreciation. Overhauled machine 2 at the cost of P36,000, after which Jeremy estimated its remaining life at one additional year and revised its residual value to P15,000. Traded in the remaining vehicle bought on November 21, 201C, for a new vehicle. A trade-in allowance of P11,100 was received, and P69,900 was paid in cash. Scrapped the vehicle bought on June 22, 201E, as it had been badly damaged in a traffic accident that it was not worthwhile repairing it. Recorded depreciation.