Practice Problems

Problem 1. On October 1, 2022, Marine Oil Corporation purchased a drilling truck for
P450,000. The company expected the truck to last for five years or 200,000 miles or 100,000
hours with an estimated residual value of P75,000 at the end of that time. During 2022, the truck
was driven 48,000 miles and 100,000 miles in 2023. It was also used for 12,000 hours in 2022
and 24,000 hours in 2023. The company’s year end is December 31.

Required: Compute the depreciation for 2022 and 2023 under each of the following methods:
a. Straight line
b. Production
c. Service-hours

Problem 2. In 2022, Shield Company paid P2,640,000 for land having an ore body estimated to
contain 240,000 tons of ore. The land will have a value of P240,000 after exhaustion of the mine.

Building was set up at a cost of P1,920,000 and heavy equipment was purchased on
January 2, 2022 for P1,240,000. The heavy equipment is capable of exhausting the mine in 10
years and will have a salvage value of P140,000 at the end of its useful life. The life of the fixed
assets is as follows:
Building 20 years
Equipment 8
In 2023, 12,000 units have been extracted.

In 2024 , there was a strike, prompting the company to shutdown temporarily.

Required. Prepare all pertinent entries from 2022 to 2024 to . Show all supporting computations