Problem 7 1. MYSTERYSCOT MANUFACTURING purchased a machine on January 1, 2000 for P50,000. At the time, it was determined that the machine has an estimated useful life of 10 years and an estimated residual value of P2,000. The company used the double declining balance method of depreciation. On January 1, 2004, the company decided to change its depreciation method from double declining balance to straight line. The machine's remaining useful life was estimated to be 5 years with a residual value of P 1,000. 2. No allowance had been set up for estimated uncollectible receivables. The company decided to set up such an allowance for the estimated probable losses as of December 31, 2003, for 2003 accounts of P350 and for 2004 accounts of P750. It was also decided to correct the charge against each year so that it shows the losses (actual and estimated) relating to that year's sales. Accounts have been written off to bad debts expenses as follows: In 2003 In 2004 2003 accounts P 200 1,000 2004 accounts 800 3. Equipment acquired by MYSTERYSCOT MANUFACTURING for P30,000 on June 30, 2002 was sold for P26,000 cash on July 1, 2004. The proceeds from the same were credited to the equipment account. The company depreciates equipment at 10% a year. Depreciation is taken up at year-end computed on a monthly basis. Depreciation of P1,600 was recorded in 2004. 4. On May 01, 2002, MYSTERYSCOT MANUFACTURING acquired a machine in exchange for 1,000 shares of its own P100 par value common stock having a fair market value of P120 on this date. The machine was recorded in the accounts at P100,000. Company policy is to take one half years depreciation on all asset acquisitions or disposals during the year. Machinery is depreciated on a straight line basis (no salvage value based on an estimated life of 10 years.) The company has recorded depreciation charge of P1,500 on this machine from acquisition to the end of the current period. 5. MYSTERYSCOT MANUFACTURING purchased a machine on January 1, 2001 for P1,500,000. At the date of acquisition, the machine had an estimated useful life of 6 years with 6 no residual value. The machine is being depreciated on a straight-line basis. On January 1, 2004, management determined as a result of additional information, that the machine had an estimated useful life of 8 years from the date of acquisition with no residual value. REQUIREMENT: Journal entries Problem 7 1. MYSTERYSCOT MANUFACTURING purchased a machine on January 1, 2000 for P50,000. At the time, it was determined that the machine has an estimated useful life of 10 years and an estimated residual value of P2,000. The company used the double declining balance method of depreciation. On January 1, 2004, the company decided to change its depreciation method from double declining balance to straight line. The machine's remaining useful life was estimated to be 5 years with a residual value of P 1,000. 2. No allowance had been set up for estimated uncollectible receivables. The company decided to set up such an allowance for the estimated probable losses as of December 31, 2003, for 2003 accounts of P350 and for 2004 accounts of P750. It was also decided to correct the charge against each year so that it shows the losses (actual and estimated) relating to that year's sales. Accounts have been written off to bad debts expenses as follows: In 2003 In 2004 2003 accounts P 200 1,000 2004 accounts 800 3. Equipment acquired by MYSTERYSCOT MANUFACTURING for P30,000 on June 30, 2002 was sold for P26,000 cash on July 1, 2004. The proceeds from the same were credited to the equipment account. The company depreciates equipment at 10% a year. Depreciation is taken up at year-end computed on a monthly basis. Depreciation of P1,600 was recorded in 2004. 4. On May 01, 2002, MYSTERYSCOT MANUFACTURING acquired a machine in exchange for 1,000 shares of its own P100 par value common stock having a fair market value of P120 on this date. The machine was recorded in the accounts at P100,000. Company policy is to take one half years depreciation on all asset acquisitions or disposals during the year. Machinery is depreciated on a straight line basis (no salvage value based on an estimated life of 10 years.) The company has recorded depreciation charge of P1,500 on this machine from acquisition to the end of the current period. 5. MYSTERYSCOT MANUFACTURING purchased a machine on January 1, 2001 for P1,500,000. At the date of acquisition, the machine had an estimated useful life of 6 years with 6 no residual value. The machine is being depreciated on a straight-line basis. On January 1, 2004, management determined as a result of additional information, that the machine had an estimated useful life of 8 years from the date of acquisition with no residual value. REQUIREMENT: Journal entries