1. ABC Company purchased a machine on December 1, 2016 at an invoice price of P4,500,000
with terms 2/10, n/30. On December 10, 2016, ABC paid the required amount for the machine.
On December 1, 2016, ABC paid P80,000 for delivery of the machine and on December 31, 2016,
it paid P310,000 for installation and testing of the machine. The machine was ready for use on
January 1, 2017. It was estimated that the machine would have a useful life of 5 years, and a
residual value of P800,000. Engineering estimates indicated that the useful life in productive
units was P200,000. Units actually produced during the first two years were 30,000 in 2017 and
48,000 in 2018. ABC Company decided to use the output method of depreciation. What is the
accumulated depreciation of the machine on December 31, 2018?
a. 1,560,000
b. 1,600,000
c. 960,000
d. 600,000
2. ABC Company acquired a machine in the first week of July 2017 and paid the following bills:
Invoice price
Freight in
Installation cost
Cost of removing the old machine preparatory
to the installation of the new machine
5,000,000
50,000
150,000
100,000
Estimated life of the machine is 8 years or a total of 100,000 working hours with no residual
value. The operating hours of the machine totaled 2017, 5,000 hours; 2018, 12,000 hours. The
entity follows the working hours method of depreciation. On December 31, 2018, the carrying
amount of the machine is:
a. 3,900,000
b. 4,299,000
c. 4,940,000
d. 4,316,000
3. ABC Company purchased a machine for P4,500,000 on January 1, 2017. The machine has an
estimated useful life of four years and a residual value of P500,000. The machine is being
depreciated using the sum of years’ digits method. The December 31, 2018 asset balance, net of
accumulated depreciation, should be:
a. 2,900,000
b. 2,700,000
c. 1,700,000
d. 1,350,000