GENERAL INSTRUCTION : For problem solving, round off your answers to nearest peso. Answers should have NO peso sign. Example : 2,487,159

1. The SYD method of depreciation is being used for a machine with a five-year estimated useful life. What would be the fraction applied to the depreciable amount to be depreciated in the fourth year?

a. 4/5

b. 2/5

c. 4/15

d. 2/15

e. none of the above

2. Which of the following statements is the assumption on which straight-line method of depreciation is based?

a. The operating efficiency of the asset decreases in later years.

b. Service value declines as a function of time rather than use.

c. Service value declines as a function of obsolescence rather than time.

d. Physical wear and tear are more important than economic obsolescence.

e. none of the above

3. A depreciable asset has an estimated 15% salvage value. At the end of its estimated useful life, the accumulated depreciation would equal the original cost of the asset under which of the following depreciation methods?

a. Output : Yes SYD : No DDB : No

b. Output : No SYD : No DDB : No

c. Output : No SYD : Yes DDB : No

d. Output : Yes SYD : Yes DDB : Yes

4. Which of the following is INCORRECT ?

a. When a change in depreciation method is necessary, the change shall be accounted for as a change in accounting estimate, and the depreciation charge for the current and future periods shall be adjusted.

b. Residual value is ignored in Declining Balance method

c. Following the decreasing charge method, the overall effect would be a uniform charge because the decreasing amount of depreciation and the increasing repairs cost will tend to equalize each other.

d. The residual value of an asset may increase to an amount equal to or greater than the carrying amount.

e. None. All statements are correct.

5. Which of the following statements is INCORRECT?

a. The depreciable amount of item of property, plant and equipment shall be allocated on a systematic basis over its useful life.

b. The depreciation method used shall not reflect the patter in which the asset's economic benefits are consumed by the entity.

c. The depreciation charge for each period shall be recognized as an expense unless it is included in the carrying amount of another asset.

d. The estimation of the useful life of an item of property, plant and equipment is a matter of judgment based on the experience of the entity with similar assets.

e. None. All statements are correct.

6. An asset's carrying amount is the

a. Cost of an asset or the amount substituted for cost in the financial statements, less its residual value.

b. Amount of cash or cash equivalent paid or the fair value of the other consideration given to acquire an asset at the time of its acquisition or construction.

c. Net amount which the enterprise expects to obtain an asset at the end of its useful life after deducting expected costs of disposal.

d. Amount at which an asset is recognized in the statement of financial position after deducting any accumulated depreciation and accumulated impairment loss.

e.Book value less residual value

7. The estimated life of a building that has been depreciated 5 years of an originally estimated life of 25 years has been revised to a remaining life of 15 years. Based on this information, the accountant should

a. Continue to depreciate the building over the original 25-year life.

b. Depreciate the remaining book value over the remaining life of 15 years.

c. Adjust the accumulated depreciation to its appropriate balance through net income based on a 20-year life and then depreciate the adjusted book value though the estimated life always been 20 years.

d. Adjust the accumulated depreciation to its appropriate balance through retained earnings based on a 20-year life and then depreciate the adjusted book value as though the estimated life had always been 20 years.

e. Depreciate the remaining book value over the remaining life of 20 years.

8. A machine with a five-year estimated useful life and an estimated 15% salvage value was acquired on January 1, 2020. The increase in accumulated depreciation for 2021 using the double-declining balance method would be

a. Original cost x 85% x 40%.

b. Original cost x 40%.

c. Original cost x 85% x 60% x 40%.

d. Original cost x 60% x 40%.

e. Depreciable amount x 40% x 40%

9. On January 1, 2020, Chungking Company provided the following :Land costing 875,000 ; Building costing 7,500,000 with accumulated depreciation of 1,644,500 ; Machinery and equipment costing 2,250,000 with accumulated depreciation of 635,000. Building is depreciated using double declining balance method and has 25 years useful life. Machinery and equipment is depreciated using Straight line method with 10 years useful life. Land improvements is depreciated using Straight line method. On January 1, a plant facility consisting of land and building was acquired from another entity in exchange for 25,000 shares of WongKarWai Company. On this date, the share had a market price of P50. Current zonal values of land and building for property tax purposes are P150,000 and P600,000, respectively. On March 31, new parking lot, street and sidewalk at the acquired plant facility were completed at a total cost of P192,000. These expenditures had an estimated useful life of 12 years. On July 1, machinery and equipment were purchased at a total invoice cost of P340,000. Additional cost of P10,000 for delivery and P50,000 for installation were incurred. On November 1, a machine with a cost of P170,000 and a carrying amount of P29,750 at date of disposition was scrapped without cash recovery. What is the total depreciation for the current year?

10. On January 1, 2020, Marion Company reported the following property, plant and equipment: Land costing 350,000 ; Land improvement costing 180,000 with accumulated depreciation of 45,000 ; Building costing 4,500,000 with accumulated depreciation of 1,050,000 ; Machinery and equipment costing 1,160,000 with accumulated depreciation of 405,000 ; Automobile costing 1,800,000 with accumulated depreciation of 1,344,000 ; Land improvements are depreciated using Straight line with 15 years useful life. Building is depreciated using 150% declining balance with 20 years useful life. Machinery and equipment is depreciated using Straight line with 10 years useful life. Automobiles is depreciated using 150 % declining balance with 3 years useful life. On January 1, machinery and equipment were purchased at a total invoice cost P260,000, which included a P 10,000 charge for freight. Installation cost of P 40,000 was incurred. On June 30, a machine purchased for P60,000 two years ago was sold for P36,000. On December 31, the entity purchased a new automobile for P570,000 cash. What is the total carrying amount of the PPE on December 31, 2020?

11. De Niro Company used straight line depreciation. On January 1, 2016 the company purchased a new machine for P10,000,000, useful life 10 years, residual value P1,000,000. On January 1, 2018, the company decided that the original estimate of useful life should be reduced by 2 years. The residual value did not change. On January 1, 2019, the entity added an automatic guide and safety shield to the machine at a cost of P600,000. This addition did not change the useful life and residual value but it resulted in increase in production. What is the depreciation in 2019?

12. Fonda Company owned a building that appeared in the statement of financial position at the end of last year at the original P16,800,000 cost less P14,000,000 accumulated depreciation. The building had been depreciated on a straight line basis under the assumption that it would have a 30-year useful life and no residual value. During the first week in January of the current year, major structural improvements were completed on the building at a P5,000,000 cost. The improvements extended the expected life of the building for 10 years beyond the 30 years originally estimated. The improvements do not involve major replacement of parts.What is the depreciation for the current year?

13. Kingsley Company was incorporated on January 1, 2016. In preparing the financial statements for the year ended December 31, 2018, the entity used the following original cost and useful life for the property, plant and equipment : Original Cost/Useful life Building 30,000,000 /15 years ; Machinery 21,000,000 /10 years ; Furniture 7,000,000 / 7 years. On January 1, 2019, the entity determined that the remaining useful life is 10 years for the building, 7 years for the machinery and 5 years for the furniture. The entity used the straight line method of depreciation with no residual value. What total amount of depreciation should be recognized for the current year?

14. Duvall Company purchased a machine on July 1, 2019 for P12,000,000. The machine has an estimated useful life of five years and a residual value of P1,600,000. The machine is being depreciated by the 150% declining balance method. What amount should be recorded as depreciation expense on the machine for the calendar year 2020?

15. On January 1, 2019, Murray Abraham Company determined that a revision in the estimate associated with the depreciation of storage facilities was appropriate. The facilities, purchased on January 1, 2017 for P12,000,000, had been depreciated using the straight line method with residual value of P1,200,000 and useful life of 20 years. The entity has determined that the remaining useful life is 10 years and residual value is P1,600,000. What amount of depreciation should be recognized for the current year?

16. Hurt Company acquired a machine on October 1, 2017 at a cost of P5,000,000 and depreciated it at 25% per annum on a straight line basis. On October 1, 2019, the entity spent P1,000,000 on upgrade to the machine in order to improve its efficiency and increase the inflow of economic benefits over the machine's remaining useful life. What amount of depreciation should be recognized for the year ended September 30, 2020?

17. On January 1, 2015, Newman Company purchased equipment for P8,000,000. The equipment has a useful life of 10 years and a residual value of P800,000. On January 1, 2019, the entity has determined that the useful life of the equipment was 12 years from the date of acquisition and the residual value was P920,000. What amount of depreciation should be recognized for the current year?

18. Douglas Company purchased a machine on January 1, 2016 for P7,520,000. The machine was estimated to have a useful life of five years and a residual value of P480,000. 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 P704,000. What amount should be recorded as depreciation for the current year?

19. Hoffman Company acquired a machine on January 1, 2017 for P20,000,000. The machine has an 8-year useful life with a P2,000,000 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 P800,000. What is the accumulated depreciation on December 31, 2019?

20. Day-Lewis Company revealed the following depreciation policy on machinery and equipment: 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 for P4,600,000 a machine acquired in 2016 for P8,400,000. The estimated residual value was P1,200,000. What amount of gain on disposal should be recorded in 2019?

21. Irons Company used straight line depreciation for the property, plant and equipment which consisted of the following at the end of each year. 2019 / 2020 Land 500,000 / 500,000 ; Building 3,900,000 / 3,900,000 ; Machinery and equipment 13,000,000/ 13,900,000 ; Accum depn 7,400,000 / 8,000,000. The depreciation expense for 2019 and 2020 was P1,000,000 and P1,100,000, respectively. What amount was debited to accumulated depreciation during 2020 because of property, plant and equipment retirement?

22. Hopkins provided the following : Machine 1 has a depreciable amount of 1,000,000, residual value of 100,000 and 20-year useful life ; Machine 2 has a residual value of 40,000, depreciable amount of 360,000 and 15-year useful life; Machine 3 has a depreciable amount of 80,000 with no residual value and 5-year useful life. What is the composite life?

23 Refer to number 22. What is the composite rate? (percentage form ; round off to 1 decimal place. example : 8.2%)

24. Pacino Company used the composite method of depreciation based on a composite rate of 25%. At the beginning of 2019, the total cost of equipment was P10,000,000 with a total residual value of P 1,200,000. The accumulated depreciation was P6,000,000 at that time. In January 2019, the entity purchased an equipment for P5,000,000 with no residual value. At the end of 2019, the entity sold an equipment with an original cost of P2,000,000 and a residual value of P400,000 for P700,000. This asset was acquired on January 1, 2017. What is the depreciation for 2019?

25. Refer to number 24. What is the gain or loss from the derecognition of the asset on December 31, 2019?

26. Hanks Company provided the following information at year-end: 2020 / 2019 Building 50,000,000 / 50,000,000 ; Accumulated Depreciation 10,000,000 / 7,750,000. The entity did not acquire or dispose of any building during 2019. The straight line depreciation is used and the residual value is 10% of asset cost. What is the useful life of the building?

27. Refer to number 26. What is the carrying amount of the building on December 31, 2021?

28. Cage Company purchased on a noncurrent asset with a useful life of 10 years on January 1, 2019 for P13,000,000. 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 P1,400,000. Inclusive of inflation the actual amount expected to be received on disposal was estimated at P1,800,000. What is the accumulated depreciation on December 31, 2023?

29. Rush Company purchased a machine on January 1, 2019 for P16,200,000. The useful life of the machine is estimated at 3 years with a residual value at the end of this period of P1,200,000. During the useful life, the expected units of production from the machine are 12,000 units in 2019, 7,000 units in 2020 and 6,000 units in 2021. What is the depreciation for 2020 using the most appropriate depreciation method?

30. On January 1, 2019, Nicholson Company purchased a new machine for P8,000,000. The new machine has an estimated useful life of eight years and the residual value was estimated P800,000. Depreciation was computed on the sum of the years' digits method. What is the carrying amount of the machine on December 31, 2020?

31. On January 1, 2017 Benigni 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 P100,000. The depreciation applicable to this equipment was P480,000 for 2019 computed under the sum of years' digits method. a. What was the acquisition cost of the equipment?

32. Refer to number 31. What is the carrying amount of the equipment on 12/31/19?

33. On April 1, 2019, Spacey Company purchased new machinery for P6,000,000. The machinery has an estimated useful life of five years and depreciation is computed by the sum of years' digits method. a. What is the accumulated depreciation of the machinery on March 31, 2021?

34. Refer to number 33. What is the carrying amount of the machinery on 12/31/21?

35. Crowe 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. Data on December 31, 2018 are as follows: Cost 2,200,000 ; Residual value 400,000 ; Accumulated Depreciation 1,440,000 ; Estimated useful life 5 years. Using the same method in 2016, 2017 and 2018, What depreciation expense should be recorded in 2019?

36. Refer to number 35. What is the carrying amount of the asset on 12/31/2019?

37. Washington Company purchased equipment which was installed and put into service January 1, 2019 at a total cost of P2,560,000. Residual value was estimated at P160,000. The equipment is being depreciated over eight years by the double declining balance method. What amount of depreciation should be recorded for 2020?

38. Refer to number 37. What is the carrying amount of the equipment on 12/31/20?

39. On January 1, 2019, Brody Company acquired an equipment to be used in operations. The equipment has useful life of 8 years and residual value of P600,000. The depreciation applicable to equipment was P1,800,000 for 2020 computed under the double declining balance method. What was the acquisition cost of the equipment?

40. Refer to number 39. What is the carrying amount of the equipment on 12/31/21?

Items 41 to 44 are based on the following schedule of depreciable assets by Penn Company on January 1, 2019 : Asset X has a carrying amount of 2,880,000, residual value of 800,000 and accumulated depreciation of 5,120,000. Asset Y has accumulated depreciation of 2,880,000, depreciable amount of 3,600,000 and cost of 4,000,000. Asset Z has cost of 5,600,000, carrying amount of 2,912,000 and residual value of 1,020,000. The useful life of each asset is 5 years. Assets X was acquired in 2017 while Assets Y and Z were acquired in 2016. The entity takes a full depreciation in the year of acquisition and no depreciation in the year of disposition. Asset Z was sold for P3,400,000 on June 30, 2019. Asset X is depreciated under the double declining method. 41. What is the depreciation of asset X for 2019?

42. What is the depreciation of Asset Y assuming same method in prior years?

43. What is the gain on sale of asset Z?

44. What is the total carrying amount of depreciable assets on 12/31/19?

45. Foxx Company purchased equipment on January 1, 2019 for P10,000,000. 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, 2019, what amount should be reported as accumulated depreciation?

46. Seymour Company purchased a machinery on January 1, 2016 for P14,400,000. 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 the years' digits. The estimate of useful of useful life and residual value remained unchanged. What is the depreciation for the current year?

47. Refer to item number 46. What is the carrying amount of the machinery on 12/31/19?

48. On January 1, 2017, Whitaker Company purchased for P4,800,000 a machine with a useful life 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?

49. Refer to number 48. What is the carrying amount of the machine on 12/31/19?

50. On January 1, 2019 Bridges Company purchased personal computers for P12,000,000. The management estimated that the computers would last approximately 4 years with residual value of P1,200,000. The entity used the double declining balance 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?

Items 51 to 62 are based on the following: Firth Company uses hand tools in its manufacturing operations. On January 1, 2019, there are 800 units on hand at P400 each. In 2019, the company acquired 400 units at P600 each. 300 units of tools were retired at cash proceeds of P100 each. At the end of the year, the estimated value of tools amounted to P400,000.In 2020, 900 units were purchased at a cost of P800 each. 700 units were retired and the company received P140 for each unit. The estimated value of tools on December 31, 2020 was P700,000. 51. Under the retirement method, what is the depreciation in 2019?

52. Under the retirement method, what is depreciation in 2020?

53. Under the retirement method, what is the balance of Tools on 12/31/19?

54. Under the retirement method, what is the balance of Tools on 12/31/2020?

55. Under replacement method, what is the depreciation in 2019?

56. Under the replacement method, what is the depreciation in 2020?

57. Under replacement method, what is the balance of Tools on 12/31/19?

58. Under replacement method, that is the balance of Tools on 12/31/20?

59. Under inventory method, what is the depreciation in 2019?

60. Under inventory method, what is the depreciation in 2020?

61. Under inventory method, what is the balance of Tools on 12/31/19?

62. Under inventory method, what is the balance of Tools on 12/31/20?

63. Which of the following statements is incorrect with respect to depreciation?

a. The depreciation method shall reflect the pattern in which the asset's economic benefits are consumed by the entity

b. Depreciation of an asset begins when it is available for use or when it is in the location and condition necessary for the intended use.

c. Depreciation ceases at the date the asset is classified as held for sale

d. Depreciation is not recognized if the fair value of an asset exceeds carrying amount.

64. Which of the following statements is true?

a. An asset is depreciated even if the fair value exceeds carrying amount

b. Land and building are not accounted for separately

c. A noncurrent asset acquired as the result of an exchange is not recognized

d. A gain on disposal is classified as revenue

65. Which of the following statements regarding depreciation is true?

a. An asset must be depreciated from the date of purchase to the date of sale

b. The annual depreciation charge shall be constant

c. The total cost must eventually be depreciated

d. If the carrying amount of an asset is less than the residual value, depreciation is not charged

66. An asset has a nine-year useful life and is to be depreciated under the sum of years' digits method. The annual depreciation expense would be the same as that under the straight line method in the

a. Third year

b. Fifth year

c. Seventh year

d. Ninth year

67. An asset has a nine-year useful life and is to be depreciated under the sum of years' digits method. The annual depreciation expense would be the same as that under the straight line method in the

a. The useful life of the addition

b. The useful life of the addition or the original asset, whichever is shorter

c. The useful life of the original asset

d. Either the useful life of the addition or the original asset as a matter of professional judgment

68. The major difference between the service life of an asset and physical life is that

a.Service life refers to the time an asset shall be used by an entity and physical life refers to how long the asset shall last

b. Physical life is the life of an asset without consideration of residual value and service life requires the use of residual value

c. Physical life is always longer than service life

d. Service life refers to the length of time an asset is of use to the original owner, while physical life refers to how long the asset shall be used by all owners

69. If there is a change from double declining balance to straight line method

a. The accumulated depreciation is adjusted to the appropriate balance through retained earnings based on the straight line method

b. The accumulated depreciation is adjusted to the appropriated balance through net income based on the straight line method

c. The accumulated depreciation is not adjusted but the remaining carrying amount is allocated over the remaining useful life using the straight line method

d. The accumulated depreciation is not adjusted but the remaining carrying amount is allocated over the original useful life using the straight line method

70. An entity acquired equipment and used the straight line depreciation with a useful life of 15 years and no residual value. After 4 years of using the asset, the entity estimated that the remaining life of the equipment was six years with no residual value. How should this change be accounted for?

a. Revising future depreciation annually to equal the original cost divided by six

b. Revising future depreciation annually to equal the carrying amount after 4 years divided by six

c. Disclosing the effect of the change one each years' earnings but maintaining the depreciation as originally determined

d. Revising future depreciation annually to equal the depreciable amount divided by six