ACC 107: Quiz 2

Depreciation
1. The equipment of Hoodwink Co. has the following data:
Cost P1,100,000
Salvage value 100,000
Useful life 4 years
20,000 units
10,000 hours
Date required January 1, 2020

How much is the depreciation reported for this equipment on Hoodwink Co.’s
Statement of Comprehensive Income for the year 2021? The company uses Sum of
Years’ digits/Double Declining method in depreciating its non-current assets.
Electro:
Depreciable Amount = P1,100,000 – 100,000 = P1,000,000
Sum-of-Years Digits = 4 + 3 + 2 + 1 = 10
2021 Depreciation = P1,000,000 * (3/10) = P300,000

Glacio:
2020 Depreciation = P1,100,000 * (1/4) * 200% = P550,000
2021 Carrying Amount = P1,100,000 – P550,000 = P550,000
2021 Depreciation = P550,000 * (1/4) * 200% = P275,000
 2. On January 1, 20x1, Sanhua Co. acquired a piece of equipment with an estimated
useful life of 4 years and a residual value of ₱80,000 for a total purchase cost of
₱400,000. At normal capacity, the equipment’s estimated service life is 40,000 hours
or a total productive capacity of 160,000 units of a product. In 20x1 and 20x2, the
actual manufacturing hours were 16,000 and 8,000, respectively, and the actual units
produced were 60,000 and 30,000, respectively. How much is the accumulated
depreciation on December 31, 20x2 under Straight-Line/Working Hours Method?
Electro:
Depreciable Amount = P400,000 – 80,000 = P320,000
Annual Depreciation = P320,000/4 = P80,000
Accumulated Depreciation, 20x2 = P80,000*2 = P160,000

Glacio:
Depreciable Amount = P400,000 – 80,000 = P320,000
Accumulated Depreciation, 20x2 = P320,000/40,000 * (16,000 +
8,000) = P192,000
 3. Two delivery vehicles were purchased on January 1, 2021. Each vehicle costs
P75,000. It has an estimated life of five years and can be sold for P15,000 at the end of
its useful life. The company uses 150% declining/straight line method in depreciating
their vehicles. How much would be the carrying amount of vehicles be on December
31, 2021.

Electro:
2021 Depreciation = (P75,000*2) * (1/5) * 150% = P45,000
Carrying Amount = P150,000 – P45,000 = P105,000

Glacio:
Total Depreciable Amount = (P75,000*2) – (P15,000*2) = P120,000
2021 Depreciation = P120,000/5 = P24,000
Carrying Amount = P150,000 – P24,000 = P126,000
 4. An equipment was bought on January 1, 2020 for P245,000. It is estimated to have a
useful life of seven years. It can be used for around 35,000 hours. During the year,
actual usage of the equipment amounted to 8,750 hours. Compute for the
Depreciation Expense for the year 2020 if the company employs service hours/Double
Declining Method in computing their depreciation.

Electro:
2020 Depreciation = P245,000 * (8,750/35,000) = P61,250

Glacio:
2020 Depreciation = P245,000 * (1/7) * 200% = P70,000
 5. On April 1, 2021, the company purchased an equipment with the cost of P750,000.
It has an estimated useful life of 10 years. It does not have a salvage value. Compute
for the Depreciation Expense for the year 2021 using straight line/sum-of-years digit
method.

Electro:
Annual Depreciation = P750,000/10 years = P75,000
2021 Depreciation = P75,000 * (9/12) = P56,250

Glacio:
Sum of Years Digits = 10 + 9 + 8 + 7 + 6 + 5 + 4 + 3 + 2 + 1 = 55
2021 Depreciation = P750,000 * (10/55) * (9/12) = P102,272.73
 6. Equipment used to produce goods was purchased for a total of P1,000,000 at the
start of the year. It was estimated that it will be used for a total of 80,000 hours. It can
also produce an estimated total of 250,000 units. During the first two years of
operation, the machine was used for 5,000 hours and 7,000 hours respectively. It also
produced 30,000 units and 25,000 units respectively during the first two years. How
much is the Accumulated Depreciation of the Equipment by the end of the second
year if the company used production/working hours method in depreciating the
equipment?
Electro:
Production Rate per unit = P1,000,000/250,000 units = P4/unit
Accumulated Depreciation, year 2 = P4 * (30,000 + 25,000) = P220,000

Glacio:
Production Rate per hour = P1,000,000/80,000 hours = P12.5/hr
Accumulated Depreciation, year 2 = P12.5 * (5,000 + 7,000) = P150,000
 7. The company completed the construction of a building on January 1, 2020. It had a
total cost of P9,500,000. It is estimated to have a useful life of 10 years. After 10 years,
the building can be sold for P2,000,000. Compute for the Depreciation Expense for the
year 2021 using 150% Declining/Sum-of-Years Digits Method.

Electro:
2020 Depreciation = P9,500,000 * (1/10) * 150% = P1,425,000
2021 Carrying Amount = P9,500,000 – P1,425,000 = P8,075,000
2021 Depreciation = P8,075,000 * (1/10) * 150% = P1,211,250

Glacio:
Depreciable Amount = P9,500,000 – 2,000,000 = P7,500,000
Sum-of-Years Digits = 10 + 9 + 8 + 7 + 6 + 5 + 4 + 3 + 2 + 1 = 55
2021 Depreciation = P7,500,000 * (9/55) = P1,227,272.73
8. Production Equipment purchased at the start of the year has a cost of P850,000. It is
estimated to have a useful life of 5 years and can produce up to 50,000 units of
finished goods. Actual production for the equipment were as follows:
Year 1 15,000
Year 2 12,500
Year 3 10,000
Year 4 7,500
Year 5 5,000
Compute for the Depreciation Expense on Year 3 if Sum-of-Years Digits/Output
Method is used.
Electro:
Sum-of-Years Digits = 5 + 4 + 3 + 2 + 1 = 15
Year 3 Depreciation = P850,000 * (3/15) = P170,000

Glacio:
Production Rate per unit = P850,000/50,000 units = P17/unit
Year 3 Depreciation = P17 * 10,000 = P170,000
 9. A new equipment was purchased on January 1, 2020. The cost of Production
Equipment is P1,200,000. It has a useful life of 10 years. Estimates show that it can
produce a total of 200,000 units of finished goods. During the year 2022, records
showed that actual production from the equipment totaled 15,000 units. How much is
the Depreciation Expense to be recognized in 2022 using output/straight line method?

Electro:
Production Rate per unit = P1,200,000/200,000 units = P6/unit
2022 Depreciation = P6 * 15,000 = P90,000

Glacio:
2022 Depreciation = P1,200,000/10 = P120,000
10. The following information pertains to the utilization of the Equipment purchased
on March 1, 2021:
Hours Used Units Produced
Year 1 6,500 12,500
Year 2 7,000 14,000
Year 3 5,500 11,000
Year 4 5,000 9,000
Year 5 6,000 13,500
The equipment has a cost of P750,000 with a salvage value of P25,000. It is estimated
that the equipment can be used for a total of 40,000 hours and can produce 80,000
units. Compute for the Depreciation Expense on Year 4 using working hours/output
method.
Electro:
Depreciable Amount = P750,000 – P25,000 = P725,000
Production Rate per hour = P725,000/40,000 hours = P18.125/hr
Year 4 Depreciation = P18.125 * 5,000 = P90,625

Glacio:
Depreciable Amount = P750,000 – P25,000 = P725,000
Production Rate per unit = P725,000/80,000 units = P9.0625/unit
Year 4 Depreciation = P9.0625 * 9,000 = P81,562.50