Question

1. Gianina Company takes a full year’s depreciation in the year of an assets acquisition, and no depreciation in the year of disposition. Data relating to one depreciable asset acquired in 2003, with residual value of P900,000 and estimated useful life of 8 years, at December 31, 2004 are:

Cost	9,900,000
Accumulated depreciation	3,750,000

Using the same depreciation method in 2003 and 2004, how much depreciation should Gianina record in 2005 for this asset?

A.	1,125,000	C.	1,650,000
B.	1,250,000	D.	1,500,000

2. On January 1, 2000 Vladimir Company purchased a machine for P4,800,000 and depreciated it by the straight line method using an estimated useful life of 8 years with no salvage value. On January 1, 2003, Vladimir determined that the machine had a useful life of 6 years from the date of acquisition and will have a salvage value of P150,000. An accounting change was made in 2003 to reflect these additional data. What should be the accumulated depreciation on December 31, 2003?

A.	2,750,000	C.	1,000,000
B.	2,800,000	D.	900,000

3. On October 1, 2018, Miami Company bought machinery under a contract that required a down payment of P500,000 plus 12 monthly payments of P300,000 for total payments of P4,100,000. The cash price of the machinery was P3,800,000. The machinery has an estimated useful life of five years and residual value of P200,000. Daryl uses the SYD method of depreciation. In its 2019 income statement, what amount should Daryl report as depreciation for this machinery?

4. LA Company purchased a boring machine on January 1, 2019 for P8,100,000. The useful life of the machine is estimated at 3 years with a residual value at the end of this period of P600,000. During its useful life, the expected units of production from the machine are 10,000 units for 2019; 9,000 units for 2020 and 6,000 units for 2021. What is the depreciation expense for 2020 using the most appropriate depreciation method?

Answer 1

1)

Cost of Asset is $9,900,000

Residual Value is $900,000

Accumulated depreciation is $3,750,000

Accumulated depreciation mean the total depreciation amount of year 2003 & 2004.

The method used here is SYD method,

Now lets prove that the depreciation method used was SYD method by finding the depreciation of year 2003 & 2004.

Depreciable base=Cost of asset - Residual value

= $9,900,000 - 900,000

= $9,000,000

Using SYD method depreciation for Year 2003 calculated as:-

8+7+6+5+4+3+2+1 = 36

Depreciation for 2003 will be

(8/36)*9,000,000

= $2,000,000

Depreciation for 2004 will be

(7/36)*9,000,000

= $1,750,000

So the accumulated depreciation is

$2,000,000 + 1,750,000

= $3,750,000

So it is proved that the depreciation method is SYD

Depreciation for 2005 will be

(6/36)*9,000,000

= $1,500,000