PROBLEM A

NI 6/30/12 NI 6/30/13 NI 6/30/14 RE,Beg. F.Y. 2014

P900,000 P570,000 P720,000

a. Unused supplies 6/30/12 22,000 (22,000)

Unused supplies 6/30/13 18,000 (18,000) P18,000
Unused supplies 6/30/14 14,000
Accrued utilities 6/30/12 (30,000) 30,000
Accrued utilities 6/30/13 (32,000) 32,000 (32,000)
Accrued utilities 6/30/14 (28,000)
Accrued interest expense 6/30/12 (10,000) 10,000
Accrued interest expense 6/30/13 (6,000) 6,000 (6,000)
Accrued interest expense 6/30/14 (2,000)

b. Insurance expense 6/30/12 75,000 75,000

Insurance expense 6/30/13 (30,000) (30,000)
Insurance expense 6/30/14 (30,000)

c. Sales in transit 6/30/12 (90,000) 90,000

Sales in transit 6/30/13 (130,000) 130,000 (130,000)
Sales in transit 6/30/14 (84,000)
Inventory, end 6/30/12 72,000 (72,000)
Inventory, end 6/30/13 100,000 (100,000) 100,000
Inventory, end 6/30/14 60,000

d. Rent expense, 6/30/14 50,000

Depreciation * (33,795)
Interest on lease liability ** (28,795)
Balances P939,000(1.) P526,000(2.) P687,410(3.) (P5,000)(4.)

*PV of MLP (P50,000x6.7590) P337,950 (PV factor is in advance and based on implicit rate)
Divide by: lease term 10 (since PV of MLP is at least 90% of FMV, the transaction
Is a finance lease)
Depreciation 33,795
CV of Warehouse 6/30/14 P 304,155

**Carrying value of Lease Liability 7/1/12 P287,950 (first payment made in advance)
Multiply by: Implicit lease rate 10%
Interest expense P 28,795

PROBLEM B

1.
Depreciation Expense
Computer acquisitions: 2011 2012 2013 Total
2011 (P90,000 x 90% / 5) P16,200 P16,200 P16,200 P48,600
2012 (P50,000 x 90% / 5) 9,000 9,000 18,000
2013 (P60,000 x 90% / 5) 10,800 10,800
TOTAL P16,200 P25,200 P36,000 P77,400
2.

2011 acquisition:
Cost P90,000
Less: Acc. Dep’n 12/31/13 48,600
Book value, 1/1/14 41,400
Less: Salvage Value (10% x P90,000) 9,000
Remaining depreciable cost 32,400
SYD rate x 2/3
Related Depreciation - 2014 P21,600

2012 acquisition:
Cost P50,000
Less: Acc. Dep’n 12/31/13 18,000
Book value, 1/1/14 32,000
Less: Salvage Value (10% x P50,000) 5,000
Remaining depreciable cost 27,000
SYD rate x 3/6
Related Depreciation - 2014 13,500

2013 acquisition:
Cost P60,000
Less: Acc. Dep’n 12/31/13 10,800
Book value, 1/1/14 49,200
Less: Salvage Value (10% x P60,000) 6,000
Remaining depreciable cost 43,200
SYD rate x 4/10
Related Depreciation - 2014 17,200

DEPRECIATION EXPENSE IN 2014 P52,300

3. No journal entry is necessary since this is a change in accounting estimate.

PROBLEM C

Cost of computer hardware P600,000

Less: Acc. Dep’n 12/31/13
(P600,000x40%) 240,000
Book value, 1/1/14 360,000
Less: Salvage value 60,000
Depreciation for 2014 P300,000

“Come to me, all of you who work hard and who carry heavy burdens and I will refresh you. Take my yoke
upon you and learn from me for I am gentle and humble of heart; and you will find rest. For my yoke is good
and my burden is light.” –Matthew 11:28-30