Fellow Company underwent a review of its records at December 31, 2020 (end of the

annual accounting period). During the review, the following situations were found that
needed attention.

a. On December 29, 2020 an equipment that cost P120,000 was debited in full to 2020
operating expenses. The equipment has a six-year estimated life and no residual
value. The company uses straight-line depreciation.
b. Late in 2020, the company constructed a warehouse using its own employees at a
total cost of P900,000. However, before the decision was made to self-construct it,
c. Fellow Company obtained a P1,000,000 bid from a contractor. Upon completion of
the warehouse, Fellow Company made the following entry in the accounts.
Warehouse 1,000,000
Cash 900,000
Profit from self-construction 100,000
c. Prior to recording the 2020 depreciation expense, the management decided that a
large machine that originally cost P1,280,000 should have been depreciated over a
useful life of 14 years instead of 20 years. The machine was acquired January 2, 2015.
Assume that the residual value of P80,000 did not change.
d. During December 2020, the company disposed of an old machine for P60,000 cash.
Annual depreciation was P20,000. At the beginning of 2020, the accounts reflected
the following:
Machine (cost) P180,000
Accumulated depreciation 130,000
No depreciation has been recorded for 2020. At the date of disposal, the following
entry was made:
Cash 60,000
Machine 60,000

Required: Prepare the appropriate correcting entries assuming that the books are still
open at December 31, 2020.
a. Equipment 120,000
Operating Expenses 120,000
b. Profit from Self Construction 100,000
Warehouse 100,000

c. Depreciation Expense 100,000

Accumulated Depreciation 100,000

d. Machine 60,000
Cash 60,000

Depreciation Expense 20,000

Accumulated Depreciation 20,000

Cash 60,000
Accumulated Depreciation 150,000
Machine 180,000
Gain on Sale 30,000