Problem 1:

Solution:

Total Cost Salvage Depreciable Life in Years Annual

Cost Depreciation
Machine A 550,000 50,000 500,000 20 25,000
Machine B 200,000 20,000 180,000 15 12,000
Machine C 40,000 40,000 5 8,000
790,000 70,000 720,000 45,000

Composite life = Total Depreciable Amount/Total Annual Depreciation

Composite life = 720,000/45,000 = 16 years

Problem 2:

Solution:

Total cost – 01/01/2020 5,000,000

Cost of new assets acquired 2,500,000

Total 7,500,000

Less: Cost of Asset Sold (1,000,000)

Remmaining Cost – 12/31/2020 6,500,000

Depreciation for 2020 (6,500,000 x 25%) 1,650,000

Problem 3: What is the gain or loss from the derecognition of the asset on December 31, 2020?

Answer: 0 because there is no gain or loss recognized.