Intermediate Accounting Depreciation PDF

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Summary

ABC Company purchased a tooling machine in 2007 for P3,000,000. The machine was depreciated on the straight line method over an estimated useful life of twenty years with no residual value. At the beginning of 2017, when the machine had been in use for ten years, the entity paid P600,000 to overhaul...

Description

1. ABC Company purchased a tooling machine in 2007 for P3,000,000. The machine was depreciated on the straight line method over an estimated useful life of twenty years with no residual value. At the beginning of 2017, when the machine had been in use for ten years, the entity paid P600,000 to overhaul the machine. As a result of this improvement, the entity estimated that the useful life of the machine would be extended an additional five years. What should be the depreciation expense for the machine in 2017? a. 150,000

c. 210,000

b. 140,000

Purchase price Accumulated depreciation (3,000,000/20) x 10 Book value Add repair Depreciable value after repair

d. 340,000

3,000,000 1,500,000 1,500,000 600,000 2,100,000 / 15 years = 140,000

2. A schedule of machinery owned by ABC Company is presented below: Total Cost

Estimated salvage value

Estimated life in

years Machine A Machine B Machine C

5,500,000 2,000,000 400,000

500,000 200,000

20 15 5

ABC computes depreciation on the straight line method. Based upon the information presented, the composite life of these assets should be: a. 13.3

b. 16.0

c. 18.0

d. 19.8

3. ABC Company acquired an airplane in 2014. At the time of acquisition, the cost of the jet frame was P46,000,000 and the additional cost of the engine was P6,000,000. In 2017, the engine was replaced with a new one costing P12,000,000. At the time of replacement, the accumulated depreciation to date on the jet frame was P17,500,000 and on the engine was P4,000,000. What amount should be derecognized at the date of replacement? a. 4,000,000

b. 2,000,000

c. 6,000,000

d. 0

4. The following information is taken from the statement of financial position of ABC Company on December 31, 2017 and December 31, 2016. Buildings cost Accumulated depreciation- buildings

2017 25,000,000 5,000,000

2016 25,000,000 3,875,000

ABC did not acquire or dispose of any buildings during 2017. ABC uses the straight line method of depreciation. If residual value is assumed to be 10% of asset cost, what is the average useful life of the buildings? a. 20.00

b. 22.22

c. 5.00

d. 6.45...