Problem 1

The Christine Manufacturing, which started operations on September 1, 2008, is

owned by Sheila Ltd. Sheila Ltd’s accounts at December 31 included the following

balances:

Machinery (at cost) 91,000

Accumulated depreciation – machinery 48,200

Vehicles (at cost; purchased November 21, 2010) 46,800

Accumulated depreciation – vehicles 19,656

Land (at cost; purchased October 25, 2008) 81,000

Building (at cost; purchased October 25, 2008) 185,720

Accumulated depreciation – building 28,614

Details of machines owned at December 31, 2011 are as follows:

Machine Purchase Date Cost useful Life Residual Value

1 October 7, 2008 P 43,000 5 years P 2,500

2 February 4, 2009P 48,000 6 years P 3,000

Additional information:

Sheila Ltd calculates depreciation to the nearest month and balances the

records at month-end. Recorded amounts are rounded to the nearest peso, and

the reporting data is December 31.

Sheila Ltd uses straight-line depreciation for all depreciable assets except

vehicles, which are depreciated on the diminishing balance at 40% p.a.

The vehicles account balance reflects the total paid for two identical delivery

vehicles, each of which cost P23,400.

On acquiring the land and building, Sheila Ltd estimated the building’s useful

life and residual value at 20 years and P5,000, respectively.