PROBLEM 29-1

On January 1, 2022, Domino Company purchased a new machine for P4,000,000. The
new machine had an estimated useful life of eight years and the residual value was
estimated to be P400,000.

Depreciation was computed on the sum of the years' digits method.

1. What is the carrying amount of the machine on December 31, 2023?

Machinery 4,000,000
Residual value 400,000
Estimated useful life 8

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

Cost 4,000,000
Accumulated depreciation
2022 (3,600,000 x 8/36) 800,000
2023 (3,600,000 x 7/36) 700,000 (1,500,000)
Carrying amount 2,500,000 - B.

PROBLEM 29-2
On January 1, 2020, Mogul Company acquired equipment to be used in the
manufacturing operations.

The equipment had an estimated useful life of 10 years and an estimated residual
value of P50,000.

The depreciation applicable to this equipment was P240,000 for 2022 computed under
the sum of years' digits method.

1. What was the acquisition cost of the equipment?

SYD = 1 + 2 + 3 + 4 + 5 + 6 + 7 + 8 + 9 + 10 = 55

Cost (SQUEEZE) 1,700,000 - B.

Accumulated depreciation:
2020 (1,650,000 x 10/55) 300,000
2021 (1,650,000 x 9/55) 270,000
2022 (1,650,000 x 8/55) 240,000 ( 810,000)
Carrying Amount 890,000
PROBLEM 29-3
On April 1, 2022, Kew Company purchased new machinery for P3,300,000 with
residual value of P300,000. The machinery had an estimated useful life of five years
and depreciation was computed by the sum of years’ digits method.

1. What amount should be reported as accumulated depreciation of the machinery on

March 31, 2024?

April 1, 2022 to March 31, 2023 (5/15 x 3,000,000) 1,000,000

April 1, 2023 to March 31, 2024 (4/15 x 3,000,000) 800,000
Accumulated depreciation - March 31, 2024 1,800,000 - B

PROBLEM 29-4
Rago 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 2019.

Cost 1,100,000
Residual value 200,000
Accumulated depreciation - January 1, 2022 720,000
Estimated useful life 5 years

1. Using the same method in 2019, 2020 and 2021, what amount of depreciation
should be recorded in 2022?

Year 2019 (900,000 x 5/15) 300,000

Year 2020 (900,000 x 4/15) 240,000
Year 2021 (900,000 x 3/15) 180,000
Year 2022 (900,000 x 2/15) 120,000 - A.

PROBLEM 29-5
Bergen Company purchased equipment which was installed and put into service
January 1, 2022 at a total cost of f 1,280,000 with estimated residual value of P80,000.

The equipment is being depreciated over eight years by the double declining balance
method.

1. What amount of depreciation should be recorded for 2023?

Straight line (100% / 8 years) 12.5%

Fixed rate (12.5 x 2) 25%

2022 depreciation (1,280,000 x 25%) 320,000

2023 depreciation (1,280,000 - 320,000 x 25%) 240,000 - B.

Under double declining balance, the residual value is ignored for the meanwhile.
PROBLEM 29-6
On January 1, 2022, Tania Company acquired an equipment to be used in operations.
The equipment had a useful life of 8 years and residual value of P300,000.

The depreciation applicable to the equipment was P900,000 for 2023 computed under
the double declining balance method.

1. What was the acquisition cost of the equipment?

Straight line rate (100% / 8 years) 12.5%

Double declining rate (12.5% x 2) 25%

Carrying amount - January 1, 2023 (900,000 x 25%) 3,600,000

Carrying amount - January 1, 2023 (3,600,000 x 75%) 4,800,000 - C.

PROBLEM 29-7
Frey Company purchased a machine for P4,500,000 on January 1, 2022. The machine
had an estimated useful life of four years and a residual value of P500,000. The
machine is being depreciated using the sum of the years' digits method.

1. What amount should be reported as accumulated depreciation on December 31,

2023?

SYD = 1 +2 + 3 + 4 = 10

Cost 4,500,000
Accumulated depreciation
2022 (4,000,000 x 4/10) 1,600,000
2023 (4,000,000 x 3/10) 1,200,000 (2,800,000) - B.
Carrying amount 1,700,000 - C.

PROBLEM 29-8
On July 1, 2022, Mundo Company purchased an equipment for P5,000,000 with
residual value estimated at P200,000. The equipment is depreciated over ten years
using the double declining balance method.

1. What amount should be recorded as depreciation for 2023?

Straight line (100% / 10 years) 10%

Fixed rate (10% x 2) 20%

2022 (5,000,000 x 20% x 6/12) 500,000

2023 (5,000,000 - 500,000 x 20%) 900,000 - B.
PROBLEM 29-9
On January 1, 2022, Miller Company purchased a machine for P2,750,000. The
machine was depreciated using the sum of years’ digits method based on a useful life
of 10 years with no residual value..

On January 1, 2024, the entity change to the straight line method of depreciation. The
entity can justify the change.

1. What amount should be recorded as depreciation for 2024?

Cost - January 1, 2022 2,750,000

Accumulated depreciation:
2022 (2,750,000 x 10/55) 500,000
2023 (2,750,000 x 9/55) 450,000 ( 950,000)
Carrying amount 1,800,000

Straight line depreciation for 2024

(1,800,000 / 8 years) 225,000 - B.

PROBLEM 29-10
Turtle Company purchased equipment on January 1, 2022 for P5,000,000. 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.

1. On December 31, 2024, what amount should be reported as accumulated

depreciation?

Straight line rate (100% / 5 years) 20%

Fixed rate (20% x 2) 40%

2022 depreciation (5,000,000 x 40%) 2,000,000

2023 depreciation (5,000,000 - 2,000,000 x 40%) 1,200,000
Accumulated depreciation - December 31, 2023 3,200,000

Depreciation for 2023 - straight line

(5,000,000 - 3,200,000 / 3 years remaining) 600,000
Accumulated depreciation - December 31, 2024 3,800,000 - B.

A change in depreciation method is accounted for as a change in accounting estimate

and therefore should be treated currently and prospectively.
PROBLEM 29-11
Xavier Company purchased a machinery on January 1, 2019 for P7,200,000. The
machinery had useful life of 10 years with no residual value and was depreciated
using the straight line method.

In 2022, a decision was made to change the depreciation method from straight line to
sum of year’s digits. The estimate of useful life and residual value remained
unchanged.

1. What amount should be reported as depreciation for 2022?

Cost - January 1, 2019 7,200,000

Accumulated depreciation - January 1, 2022
(7,200,000 / 10 x 3) 2,160,000
Carrying amount - January 1, 2022 5,040,000

SYD for the remaining life of 7 years

(1 + 2 + 3 + 4 + 5 + 6 + 7) = 28

Depreciation for 2022 (5,040,000 x 7/28) 1,260,000 - A

PROBLEM 29-12
On January 1, 2020, Bride Company purchased for P 2,400,000 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, 2022.

1. What amount should be reported as depreciation for 2022?

Straight line rate (100% / 10) 10%

Double declining rate (10% x 2) 20%

2020 depreciation (2,400,000 x 20%) 480,000

2021 depreciation (2,400,000 - 480,000 x 20%) 384,000
Accumulated depreciation - December 31, 2021 864,000

Depreciation for 2022 - straight line

(2,400,000 - 864,000 / 8 years remaining) 192,000 - B
PROBLEM 29-13
On January 1, 2022, London Company purchased personal computers for P6,000,000.
the management estimated that the computers would last approximately 4 years with
residual value of P600,000. The entity used the double declining balance method.

During January 2023, the management realized that technological advancement had
made the computers virtually obsolete and proposed changing the remaining useful
life to 2 years.

1. What amount of depreciation should be recognized for 2023?

Double declining rate (25% x 2) 50%

Cost 6,000,000
Depreciation for 2022 (50% x 6,000,000) 3,000,000
Carrying amount - January 1, 2023 3,000,000
Residual value ( 600,000)
Maximum depreciation in 2023 2,400,000 - B.

Fixed rate in 2023 (100% / 2 x 2) 100%

This means that the computers should be fully depreciated in 2023.

Since there is residual value of P600,000, the maximum depreciation for 2023 is equal
to the carrying amount of P3,000,000 minus the residual value of P600,000.

PROBLEM 29-14
Spiderman Company purchased a machine on January 1, 2019 for P3,760,000. The
machine was estimated to have a useful life of five years and a residual value of
P240,000. The entity used the sum of years' digits method of depreciation.

On January 1, 2022, the entity determined that the total useful life of the machine
should have been four years and the residual value is P352,000.

1. What amount should be recorded as depreciation for 2022?

SYD = 1 + 2 + 3 + 4 + 5 =15
Accumulated fractions for 2019, 2020, and 2021
(5/15 + 4/15 + 3/15) 12/15

Cost - January 1, 2019 3,760,000

Accumulated depreciation - December 31, 2021
(3,760,000 - 240,000 x 12/15) (2,816,000)

Carrying amount - January 1, 2022 944,000

Residual value ( 352,000)
Remaining depreciable amount 592,000 - C.

Since the revised total useful life is 4 years and three years already expired, the
remaining useful life is only one year.
Accordingly, the remaining depreciable amount is charged to depreciation expense for
2022.

PROBLEM 29-15
Arreza Company acquired a machine on January 1, 2020 for P10,000,000. The
machine had an 8-year useful life with a P1,000,000 residual value and was
depreciated using the sum of years' digits method.

In January 2022, the entity estimated that the asset's useful life from the date of
acquisition should have been 6 years and the residual value is P400,000.

1. What amount should be reported as accumulated depreciation on December 31,

2022?

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

Cost - January 1, 2020 10,000,000

Accumulated depreciation
2020 (9,000,000 x 8/36) (2,000,000)
2021 (9,000,000 x 7/36) (1,750,000)
Carrying amount - December 31, 2022 6,250,000

Accumulated depreciation - January 1, 2022

(2,000,000 + 1,750,000) 3,750,000
Depreciation for 2022 (4/10 x 5,850,000) 2,340,000
Accumulated depreciation - December 31, 2022 6,090,000 - B.

Carrying amount - January 1, 2022 6,250,000

Residual value ( 400,000)
Remaining depreciable amount 5,850,000
PROBLEM 29-16
Ambitious Company showed the following schedule of depreciable assets on January
1, 2022.

Asset Cost Accumulated Acquisition Residual

depreciation date
A 4,000,000 2,560,000 2020 400,000
B 2,000,000 1,440,000 2019 200,000
C 2,800,000 1,344,000 2019 560,000

The useful life of each asset is 5 years. The entity takes a full depreciation in the year
of acquisition and no depreciation in the year of disposition.

Asset C was sold for P1,700,000 on June 30, 2022.

Asset A is depreciated under the double declining method.

1. What amount should be reported as depreciation of Asset A for 2022?

Straight line rate (100% / 5 years) 20%

Double declining rate (20% x 2) 40%

2022 [(4,000,000 - 2,560,000) x 40%] 576,000 - D.

2. What amount should be reported as depreciation of Asset B for 2022 assuming

same method in prior years?

SYD = 1+2+3+4+5 = 15
2019 (1,800,000 x 5/15) 600,000
2020 (1,800,000 x 4/15) 480,000
2021 (1,800,000 x 3/15) 360,000
Accumulated depreciation 1,440,000

Accordingly, the SYD is followed for 2022

2022 (1,800,000 x 2/15) 240,000 - A.

3. What amount should be reported as gain on sale of Asset C?

Sale price 1,700,000

Carrying amount of machine:
Cost - 2022 2,800,000
Accumulated depreciation 1,344,000 1,456,000
Gain on sale 244,000 - A.
PROBLEM 29-17
Patterson Company provide the following information on January 1, 2022:

Vehicle cost 5,000,000

Useful life in years 5
Useful life in miles 100,000
Residual value 1,000,000

Actual miles driven

2022 30,000
2023 20,000
2024 15,000

1. What amount should be reported as depreciation for 2024 using the SYD method?

SYD = 1+2+3+4+5 = 15
2022 (4,000,000 x 5/15) 1,333,333
2023 (4,000,000 x 4/15) 1,066,667
2024 (4,000,000 x 3/15) 800,000 - C.

2. What amount should be reported as accumulated depreciation on December 31,

2023 using the double declining balance method?

Straight line rate (100% / 5) 20%

Double declining rate (20% x 2) 40%

Cost 5,000,000
2022 depreciation (5,000,000 x 40%) 2,000,000
2023 depreciation (5,000,000 - 2,000,000 x 40%) 1,200,000 (3,200,000) - D.
Total 1,800,000

3. What amount should be reported as accumulated depreciation on December 31,

2024 using the miles driven?

Year Particular Depreciation Accumulated Carrying

Depreciation Amount
4,000,000
2022 30,000 x 40 1,200,000 1,200,000 2,800,000
2023 20,000 x 40 800,000 2,000,000 2,000,000
2024 15,000 x 40 600,000 2,600,000 - B. 1,400,000
2,600,000