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Accounting Changes: Estimating
Useful Life and Residual Value
Change in Accounting Estimate
Problem 9-
Blue Company purchased a machine on January 1, 2012 for ₱6,000,000. At the date of acquisition, the machine had a life of six years with no residual value. The machine is being depreciated on a straight-line basis. On January 1, 2015, the entity determined that the machine had a useful life of eight years from the date of acquisition with no residual value.
The depreciation of the machine for 2015 is: a. ₱750,
Problem 9-
On January 1, 2012, Flax Company purchased a machine for ₱5,280,000 and depreciated it by the straight-line method using an estimated useful life of eight years with no residual value. On January 1, 2015, the entity determined that the machine had a useful life of six years from the date of acquisition and the residual value was ₱480,000. An accounting change was made in 2015 to reflect these additional data.
The accumulated depreciation for the machine on December 31, 2015 is: c. ₱3,200,
Problem 9-
On January 1, 2013, Milan Company purchased an equipment for ₱6,000,000. The equipment had been depreciated using the straight-line method with a residual value of ₱600,000 and useful life of 20 years. On January 1, 2015, the entity determined that the remaining useful life is 10 years and the residual value is ₱800,000.
The depreciation for 2015 is: c. ₱466,
Problem 9-
On January 1, 2011, Roma Company purchased equipment for ₱4,000,000. The equipment has a useful life of 10 years and a residual value of ₱400,000. On January 1, 2015, the entity determined that the useful life of the equipment was 12 years from the date of acquisition and the residual value was ₱460,000.
The depreciation of the equipment for 2015 is: d. ₱300,
Problem 9-
On January 1, 2015, Canyon Company decided to decrease the estimated useful life of an existing patent from 10 years to 8 years. The patent was purchased on January 1, 2010 for ₱3,000,000. The estimated residual value is zero. The entity decided on January 1, 2015 to change the depreciation method from an accelerated method to the straight-line method.
On January 1, 2015, the cost of a depreciable asset is ₱8,000,000 and the accumulated depreciation is ₱3,400,000. The remaining useful life of the depreciable asset on January 1, 2015 is 10 years and the residual value is ₱200,000.
The total charge against income for 2015 as a result of the accounting changes is: b. ₱960,
Problem 9-
On January 1, 2012, Charisma Company bought a machine for ₱1,500,000. The machine had a useful life of six years with no residual value. On January 1, 2015, the entity determined that the machine had a useful life of eight years from the date it was acquired with no residual value. The straight-line method of depreciation is used.
The amount of depreciation that should be recorded for 2015 is: b. ₱150,
Problem 9-
Rodrigo Company had purchased an equipment on January 1, 2012 for ₱2,400,000. The entity used the straight-line depreciation based on a ten- year useful life with no residual value. During 2015, the entity decided that the equipment would be used only three more years.
The entry that should be made on January 1, 2015 to reflect this accounting change is: d. Debit depreciation and credit accumulated depreciation ₱560,000.
Problem 9-
On January 1, 2013, Brazillia Company purchased for ₱4,800,000 a machine with a useful life of ten years and a residual value of ₱200,000. The machine was depreciated by the double declining balance, and the carrying amount of the machine was ₱3,072,000 on December 31, 2014. The entity changed to the straight-line method on January 1, 2015. The residual value did not change.
The depreciation expense on this machine for the year ended December 31, 2015 is: b. ₱384,
| Asset | Original Cost | Useful Life | |-----------|---------------|-------------| | Building | ₱15,000,000 | 15 years | | Machinery | ₱10,500,000 | 10 years | | Furniture | ₱3,500,000 | 7 years |
On January 1, 2015, the entity determined that the remaining useful life is 10 years for the building, 7 years for the machinery, and 5 years for the furniture. The entity used the straight-line method of depreciation with no residual value.
The total depreciation for 2015 is: a. ₱2,650,
