GEN009 ENHANCEMENT SUBJECT FOR ACC107

ACTIVITY 2

Form a group of 5 members. Each group will have one (1) group facilitator. Accomplish the activities
provided below. Each group will only have 1 output to be submitted.

Below is the exam of Mr. X.

1. Evaluate his answers whether correct or incorrect by putting a check in the space provided.
If you thought his answer is incorrect, provide the correct answer in the remarks section.
2. For computational part, evaluate Mr. X’s solution and answer. Choose whether his answer is
correct or incorrect. If you thought his answer is incorrect, provide the correct solution in the
remarks section.

THEORY:

1. I. Accumulated Depreciation is the systematic allocation of depreciable amount of an asset over

its estimated useful life   ( DEPRECIAION)
II. After the initial recognition the entity shall choose either cost model or revaluation model as
its accounting policy and shall apply that policy to an entire class of PPE

Answer: Both statements are True

Evaluate:

CORRECT: ____________ INCORRECT: _______x________

Remarks: Only Statement II is true

2. I. PPE measured using cost model shall measure PPE at its cost less any accumulated
depreciation and any accumulated impairment losses
II. Physical depreciation is related to an asset's deterioration and wear and tear over a period of
time

Answer: Both statements are True

Evaluate:

CORRECT: X INCORRECT: _______________

Remarks: _____________________________________________________
3. I. Functional depreciation arise from obsolescence or inadequacy of asset to perform efficiently
II. Obsolescence results when an asset is no longer appropriate because of an increased volume of
operations. ( THIS IS NOT THE MEANING OF OBSCOLESCENCE)

Answer: Only statement II is True

Evaluate:

CORRECT: ____________ INCORRECT: X

Remarks: Only Statement I is true

4. I. Technical obsolescence , as when the asset is superseded by a newer model or another asset II.
When computing for depreciation, each part of an item of PPE with cost that is significant in
relation to the total cost of the item shall be depreciated separately.

Answer: Both statements are False

Evaluate:

CORRECT: ____________ INCORRECT: X

Remarks: Both statements are True

5. I. Depreciation is not recognize if the fair value of the asset exceeds its carrying amount II.
Depreciation starts when the PPE is available for use. Its location and condition necessary for it to
be capable of operating in the manner intended by the management

Answer: Only Statement II is True

Evaluate:

CORRECT: X INCORRECT: _______________

Remarks: _____________________________________________________
6. I. Residual amount is the cost of an asset or other amount substituted for cost less salvage vale
( DEPRECIABLE AMOUNT)
II. Depreciable amount is the estimated amount that an entity would currently  obtain from
disposal of the asset after deducting the estimated costs of disposal, if the asset were already of
the age and in the condition expected at the end of its useful life ( RESIDUAL VALUE OR
SALVAGE VALUE)

Answer: Both statements are true

Evaluate:

CORRECT: ____________ INCORRECT: X

Remarks: Both statements are false

7. I if the residual value is equal to or greater than the assets carrying amount. The assets
depreciation is charge to zero.
II. Useful life is defined in terms of the asset's expected utility to the entity.

Answer: Both statements are True

Evaluate:

CORRECT: X INCORRECT: _______________

Remarks: _____________________________________________________

8. I. The residual value and the useful life shall be reviewed at least each financial year-end. If the
expectations differ from previous estimates the change is treated as a change in accounting
estimate and accounted for retrospectively ( PROSPECTIVELY)
II. Fair Value is the amount at which an asset is recognized after deducting any accumulated
depreciation and accumulated impairment losses ( CARRYING AMOUNT)

Answer: Both statements are True

Evaluate:

CORRECT: ____________ INCORRECT: X

Remarks: Both statements are false

 9. I. Depreciation shall begin when the asset is available for use. It ceases when the asset is
derecognized or classified as held for sale under PFRS 5 II.
Depreciation does not cease when the asset becomes idle or is retired from active use unless the
asset is fully depreciated.

Answer: Both statements are true

Evaluate:

CORRECT: X INCORRECT: _______________

Remarks: _____________________________________________________

10. I depreciation method that is based on revenue that is generated by an activity that includes the
use of an asset is appropriate ( THIS IS PROHIBITED)
II. Under straight line method, depreciation is recognized evenly over the useful life of the asset.

Answer: Only statement I is true

Evaluate:

CORRECT: ____________ INCORRECT: X

Remarks: Only the Statement II is true

COMPUTATIONAL

1. Straight-line Method. On January 1, 2021 EXO Company acquired a land for P2,000,000.  In
addition the company paid 10,000 for grading and leveling, special assessment of 25,000.  How
much is the depreciation expense on December 31, 2021?

Answer: Cost of Land 2,035,000/ 20 years = 101,750 Depreciation Expense Dec 31, 2021

Evaluate:

CORRECT: ____________ INCORRECT: X

Remarks: Land is not depreciated

2. Straight-line Depreciation. On April 1, 2021 EXO Company acquired a machinery for P900,000.
Additional cost paid are the following: 50,000 Cost of training employees who will operate the
machine 20,000 freight and 70,000 installation and testing cost. It was estimated that the useful
life of the machine is 6 years with a residual value of 30,000. How much is the depreciation
expense on December 31, 2021?

Answer: Cost of Machine 1,020,000/6 years = 170,000 Depreciation Expense Dec 31, 2021

Evaluate:

CORRECT: ____________ INCORRECT: X

Remarks:
Cost of the Machine 990,000
Less: Residual Value 30,000
Depreciable Amount 960,000
Divide: useful life 6 years
Annual Depreciation 160,000
Multiply 9/12
Depreciation, Dec 31, 2021 120,000

3. Straight-line Depreciation. On April 1, 2021 EXO Company acquired a machinery for P900,000.
Additional cost paid are the following: 50,000 Cost of training employees who will operate the
machine 20,000 freight and 70,000 installation and testing cost. It was estimated that the useful
life of the machine is 6 years with a residual value of 30,000. How much is the depreciation
expense on December 31, 2022?

Answer: Cost of Machine 990,000

Less: Residual Value 30,000
Depreciable Amount 960,000
Divide: Useful life 6 years
Multiply: 9/12
Depreciation, Dec 31, 2022 120,000

Evaluate:

CORRECT: ____________ INCORRECT: X

Remarks:
Cost of the Machine 990,000
Less: Residual Value 30,000
Depreciable Amount 960,000
Divide: useful life 6 years
Annual Depreciation 160,000
4. Straight-line Depreciation. On April 1, 2021 EXO Company acquired a machinery for P900,000.
Additional cost paid are the following: 50,000 Cost of training employees who will operate the
machine 20,000 freight and 70,000 installation and testing cost. It was estimated that the useful
life of the machine is 6 years with a residual value of 30,000. How much is the carrying amount
of the machine  on December 31, 2022?

Answer: Cost of Machine 990,000

Divide: Useful life 6 years
Multiply: 9/12
Depreciation, Dec 31, 2023 123,750

Cost of the Machine 990,000

Accumulated Depreciation 123,750
Carrying Amount, Dec 31,2022 866,250

Evaluate:

CORRECT: ____________ INCORRECT: X

Remarks:

Cost of the Machine 990,000

Less: Residual Value 30,000
Depreciable Amount 960,000
Divide: useful life 6 years
Annual Depreciation 160,000
Multiply 9/12
Depreciation, Dec 31, 2021 120,000

Cost of the Machine 990,000

Less: Residual Value 30,000
Depreciable Amount 960,000
5. Divide: useful life 6 years SYD method. On January 1, 2021
Depreciation, Dec 31, 2022 160,000 EXO company acquired a machine
with an estimated useful life of 4
years. EXO paid P90,000 for the
Depreciation, Dec 31, 2021 120,000
machine.  Additional costs paid are
Depreciation, Dec 31, 2022 160,000
the following: Freight and insurance
Accumulated Depreciation 280,000 30,000, Cost of testing and
installation 20,000 , commission
Cost of Machine 990,000 paid to acquire the machine  25,000
Accumulated Depreciation 280,000
Carrying Amount, Dec 31, 2022 710,000
 and 25000 for the safety rail surrounding the machine. It was estimated that the residual value of
the machine is 20,000. How much is the depreciation expense to be recorded on December 31,
2021?

Answer: Cost of Machine 190,000

Multiply: SYD fraction 4/10
Depreciation, Dec 31, 2021 76,000

Evaluate:

CORRECT: ____________ INCORRECT: X

Remarks:

Answer: Cost of Machine 190,000

Less: Residual Value 20,000
Depreciable Amount 170,000
Multiply: SYD fraction 4/10
Depreciation, Dec 31, 2021 68,000

6. SYD method. On January 1, 2021 EXO company acquired a machine with an estimated useful
life of 4 years. EXO paid P90,000 for the machine.  Additional costs paid are the following:
Freight and insurance 30,000, Cost of testing and installation 20,000 , commission paid to acquire
the machine  25,000 and 25000 for the safety rail surrounding the machine. It was estimated that
the residual value of the machine is 20,000. How much is the depreciation expense to be recorded
on December 31, 2022?

Answer: Cost of Machine 190,000

Less: Residual Value 20,000
Depreciable Amount 170,000
Multiply: SYD fraction 4/10
Depreciation, Dec 31, 2022 68,000

Evaluate:

CORRECT: ____________ INCORRECT: X

Remarks:
Cost of Machine 190,000
Less: Residual Value 20,000
Depreciable Amount 170,000
Multiply: SYD fraction 4/10
 Depreciation, Dec 31, 2021 68,000

Cost of Machine 190,000

Less: Residual Value 20,000
Depreciable Amount 170,000
Multiply: SYD fraction 3/10
Depreciation, Dec 31, 2022 51,000

7. SYD method. On January 1, 2021 EXO company acquired a machine with an estimated useful
life of 4 years. EXO paid P90,000 for the machine.  Additional costs paid are the following:
Freight and insurance 30,000, Cost of testing and installation 20,000 , commission paid to acquire
the machine  25,000 and 25000 for the safety rail surrounding the machine. It was estimated that
the residual value of the machine is 20,000. How much is the Carrying amount of the machine to
be recorded on December 31, 2022?

Answer: Cost of Machine 190,000

Less: Residual Value 20,000
Depreciable Amount 170,000
Multiply: SYD fraction 4/10
Depreciation, Dec 31, 2021 68,000

Cost of Machine 190,000

Less: Residual Value 20,000
Depreciable Amount 170,000
Multiply: SYD fraction 3/10
Depreciation, Dec 31, 2022 51,000

Cost of Machine 190,000

Accumulated Depreciation 119,000
Carrying Amount, Dec 31, 2022 71,000

Evaluate:

CORRECT: X INCORRECT: _______________

Remarks: _____________________________________________________

8. Double declining balance method. On January 1, 2021 EXO company acquired a machine with an
estimated useful life of 4 years. EXO paid P90,000 for the machine.  Additional costs paid are the
following: Freight and insurance 30,000, Cost of testing and installation 20,000 , commission
paid to acquire the machine  25,000 and 25000 for the safety rail surrounding the machine. It was
estimated that the residual value of the machine is 20,000. How much is the depreciation expense
to be recorded on December 31, 2021

Answer: Cost of Machine 190,000

 Less: Residual Value 20,000
Depreciable Amount 170,000
Multiply: DDB Dep. Rate 50%
Depreciation, Dec 31, 2021 85,000

Evaluate:

CORRECT: ____________ INCORRECT: X

Remarks:

Cost of Machine 190,000

Multiply: DDB Dep. Rate 50%
Depreciation, Dec 31, 2021 95,000

9. Double declining balance method. On January 1, 2021 EXO company acquired a machine with an
estimated useful life of 4 years. EXO paid P90,000 for the machine.  Additional costs paid are the
following: Freight and insurance 30,000, Cost of testing and installation 20,000 , commission
paid to acquire the machine  25,000 and 25000 for the safety rail surrounding the machine. It was
estimated that the residual value of the machine is 20,000. How much is the accumulated
depreciation  on December 31, 2022?

Answer: Cost of Machine 190,000

Multiply: DDB Dep Rate 50%
Depreciation, Dec 31, 2021 95,000

Carrying Amount of Machine 95,000

Multiply: DDB Dep Rate 50%
Depreciation, Dec 31, 2021 47,500

Depreciation, Dec 31, 2021 95,000

Depreciation, Dec 31, 2022 47,500
Accumulated Dep, Dec 31, 2022 142,500

Evaluate:

CORRECT: X INCORRECT: _______________

Remarks: _____________________________________________________

10. Double declining balance method. On January 1, 2021 EXO company acquired a machine with an
estimated useful life of 4 years. EXO paid P90,000 for the machine.  Additional costs paid are the
following: Freight and insurance 30,000, Cost of testing and installation 20,000 , commission
paid to acquire the machine  25,000 and 25000 for the safety rail surrounding the machine. It was
estimated that the residual value of the machine is 20,000. How much is the carrying amount of
the machine on December 31, 2022?
h

Answer: Cost of Machine 190,000

Less: Residual Value 20,000
Depreciable Amount 170,000
Multiply: DDB Dep Rate 50%
Depreciation, Dec 31, 2021 85,000

Carrying Amount of Machine 105,000

Less: Residual Amount 20,000
Depreciable Amount 85000
Multiply: DDB Dep Rate 50%
Depreciation, Dec 31, 2022 42,500

Cost of Machine 190,000

Accumulated Depreciation 127,500
Carrying Amount, Dec 31, 2022 62,500

Evaluate:

CORRECT: ____________ INCORRECT: X

Remarks:
Answer: Cost of Machine 190,000
Multiply: DDB Dep Rate 50%
Depreciation, Dec 31, 2021 95,000

Carrying Amount of Machine 95,000

Multiply: DDB Dep Rate 50%
Depreciation, Dec 31, 2022 47,500

Cost of Machine 190,000

Accumulated Depreciation 142,500
Carrying Amount, Dec 31, 2022 47,500

100%-20%=80%

Carrying amount = Cost of the Machine * 80% = CA

Cost of the Machine * 80% * 80% = CA