Name: ___________________________________ Score: __________________
On January 1, 2023, JAPAN CORP. acquired a factory equipment. Information about the acquisition of such
equipment is presented below:
List price P400,000
Trade discount 20%
Import duties 12,400
Recoverable taxes 10,000
Insurance paid during delivery of the equipment 15,400
Cost of removing the old equipment 5,000
Cost of installing the new equipment 18,600
The equipment was acquired on account with a term of 2/10, n/30. The equipment is expected to have a
five-year life, with a residual value of P10,000 at the end of five years. It was also estimated that the
machine can produce up to 1,000,000 units of product over its useful life. Actual units produced for the
current year was 100,000 units.
1. What is the initial cost of the factory equipment?
A. P326,000 C. P360,000
B. P340,000 D. P370,000
2. The following statements are presented to you for your evaluation:
S1: The depreciation expense during the year is P72,000 using straight line method.
S2: The depreciation expense during the year is P144,000 using double declining
balance method.
A. Only S1 is correct. C. Both statements are correct.
B. Only S2 is correct. D. None from the statements is correct.
3. What is the depreciation expense for the year assuming the units of production method is used?
A. P35,000 C. P32,600
B. P36,000 D. P37,000
4. Assuming SYD method is used, what is the carrying amount of the office equipment as of December 31,
2024?
A. P150,000 C. P220,000
B. P144,000 D. P180,000
5. Assume that originally JAPAN used straight-line method in depreciating the office equipment but decided
to change it to SYD method at the beginning of 2025 with no change in residual value and useful life. What
is the depreciation expense for the year 2025?
A. P84,000 C. P110,000
B. P70,000 D. P105,000
6. Assume that originally JAPAN used straight-line method in depreciating the office equipment but decided
to change it to double declining balance method at the beginning of 2025. The assets remaining useful life
after the change is estimated
to be 4 years. What is the depreciation expense for the year 2025?
A. P84,000 C. P110,000
B. P70,000 D. P105,000
7. Assume that originally JAPAN used SYD method in depreciating the office equipment but decided to
change it to 150% declining balance method at the beginning of 2025 with no change in residual value and
useful life. What is the carrying amount of the asset as of December 31, 2025?
A. P70,000 C. P80,000
B. P75,000 D. P90,000
8. Assume that originally JAPAN used SYD method in depreciating the equipment. On July 1, 2025, the
company sold the equipment for P120,000. How much is the gain or loss on sale to be recognized in profit
or loss?
A. P5,000 gain C. P30,000 loss
B. P5,000 loss D. P30,000 gain
9. JAPAN’s accounting policy in depreciation is that a full charge of depreciation shall be made for the year
of acquisition and none on the year of disposal. Assume that originally JAPAN used the straight-line method
in depreciating the equipment. On July 1, 2025, the company sold the equipment for P210,000. How much
is the gain or loss on sale to be recognized in profit or loss?
A. P25,000 loss C. P10,000 gain
B. P25,000 gain D. P10,000 loss
10. Assume that originally KANSAS used straight-line method of depreciating the equipment but on July 1,
2025 it incurred a capitalizable cost of P15,000. Based on new management estimate, the asset has no
residual value at the end of its useful
life. What is the depreciation expense for the year 2025?
A. P88,000 C. P115,000
B. P94,000 D. P112,500
