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(b) the number of production or similar units expected Output x Depreciation rate
to be obtained from the asset by an entity. DR = DA/total est. output
2. On January 1, 2017, Paete Company signed a 12- 8. Pantabangan Company takes a full year’s
year lease for a building. Paete has an option to depreciation in the year of an assets acquisition,
renew the lease for an additional 8-year period on and no depreciation in the year of disposition.
or before January 1, 2021. During January 2019, Data relating to one depreciable asset acquired in
Paete made substantial improvements to the 2017, with residual value of P900,000 and
building. The cost of the improvements was estimated useful life of 8 years, at December 31,
P3,600,000, with an estimated useful life of 15 2018 are:
years. At December 31, 2019, Paete intended to
exercise the renewal option. Paete has taken a full Cost P9,900,000
year’s amortization on this improvement. What Accumulated depreciation 3,750,000
should be the depreciation charge for the year
Using the same depreciation method in 2017 and
ended 31 December 2019?
2018, how much depreciation should Pantabangan
record in 2019 for this asset?
3. Takatak, Inc., uses the group depreciation method
for its furniture account. The depreciation rate
9. Roxanne Co. purchased equipment for P500,000.
used for furniture is 21%. The balance in the
The equipment had an estimated 10-year service
furniture account on December 31, 2018, was
life. Roxanne’s policy for 10-year assets is to use
P125,000, and the balance in Accumulated
the 150% declining balance depreciation method
Depreciation - Furniture was P61,000. The
for the first five years of the asset’s life and then
following purchases and dispositions of furniture
switch to the straight-line depreciation method.
occurred in 2019 (assume that all purchases and
What amount should Roxanne report as
disposals occurred at the beginning of each year).
accumulated depreciation for equipment at the end
Assets Sold of the sixth year?
Assets Purchased Cost Selling Price
P35,000 P27,000 P8,000
10. On March 31, 2019, Shooter Corp. retired a
The carrying amount of furniture at December 31, machine used in manufacturing designer parts.
2019 is The machine was acquired May 1, 2009. Straight-
line depreciation method was used. The asset had
an estimated residual value of P20,000 and a five-
4. Bongabon Corporation acquired a machine at a year life. On December 31, 2018, the balance in
total cost of P5,200,000. The estimated life of the the accumulated depreciation is P330,000. The
machine is 8 years or a total of 100,000 working machine was scrapped and the company did not
hours with no salvage value. The operating hours receive a single consideration. The loss on
of the machine totaled: 2018, 5,000 hours; 2019, retirement is
12,000 hours. The company follows the working
hours method of depreciation. On December 31,
2019, the carrying amount of the machine is 11. Entity A acquired an asset that had a cost of
P130,000. The asset is being depreciated over a
5-year period using the sum-of-the-years’ digit
5. The Vientiane Company purchased a machine on 1 method. It has a salvage value estimated at
January 2018 for P81,000. The useful life of the P10,000. The loss/gain if the asset is sold for
machine is estimated at 3 years with a residual P38,000 at the end of the third year is
value at the end of this period of P6,000. During its
useful life, the expected units of production from the
machine are:
2018 12,000 units
2019 7,000 units
2020 5,000 units
What should be the depreciation expense for the
year ended 31 December 2019, using the most
appropriate depreciation method permitted by
PAS16 Property, plant and equipment?