1.

At the beginning of current year, Love Company bought machinery under a contract that required a down payment of
100,000, plus 24 monthly payments of 50,000 each, for total cash payments of 1,300,000. The cash equivalent price of the
machinery was 1,100,000. The machinery has an estimated useful life of 10 years and estimated residual value of 50,000.
The entity used straight line depreciation.

What amount should be reported as depreciation of the machinery for the current year?
a. 105,000 b. 110,000 c. 125,000 d. 130,000

2. Parable Company revealed the following depreciation policy on machinery:

I. A full year depreciation is taken in the year of acquisition
II. No depreciation is taken in the year of disposition
III. The estimated useful life is five years
IV. The straight line method is used

On June 30, 2020, the entity sold for 2,300,000 a machine acquired in 2017 for 4,200,000. The estimated residual value
was 600,000. What amount of gain on disposal should be recorded in 2020?
a. 140,000 b. 260,000 c. 620,000 d. 980,000

3. Wishful Company used straight line depreciation for the property, plant and equipment which consisted of the
following at the end of each year:
2019 2020
Land 250,000 250,000
Building 1,950,000 1,950,000
Machinery and Equipment 6,500,000 6,950,000
Accumulated Depreciation 3,700,000 4,000,000

The depreciation expense for 2019 and 2020 was 500,000 and 550,000, respectively. What amount was debited to
accumulated depreciation during 2020 because of property, plant and equipment retirement?
a. 400,000 b. 250,000 c. 200,000 d. 100,000

4. Silent Company provided the following schedule of machinery:

Total Cost Estimated residual value Useful life in years
Machine A 550,000 50,000 20
Machine B 200,000 20,000 15
Machine C 40,000 5

What is the composite life of the assets?

a. 13.3 b. 16.0 c. 18.0 d. 19.8

5. Norraine Company used the composite method of depreciation based on a composite rate of 25%. At the beginning of
2020, the total cost of equipment was 5,000,000 with a total residual value of 600,000. The accumulated depreciation was
3,000,000 at that time.

In January 2020, the entity purchased an equipment for 2,500,000 with no residual value. At the end of 2020, the entity
sold an equipment with an original cost of 1,000,000 and a residual value of 200,000 for 350,000. This asset was acquired
on January 1, 2018.

What is the depreciation for 2020?

a. 1,625,000 b. 1,875,000 c. 1,125,000 d. 975,000

What is the gain or loss from the derecognition of the asset on December 31, 2020?
a. 100,000 gain b. 150,000 loss c. 50,000 loss d. P0

6. Meager Company purchased a machinery with a useful life of 10 years on January 1, 2020 for 6,500,000. On December
31, 2020, the amount the entity would receive from the disposal of the asset if it was already of the age and in the
condition expected at the end of the useful life was estimated at 700,000. Inclusive of inflation the actual amount expected
to be received on disposal was estimated at 900,000.

What is the depreciation for the current year?

a. 580,000 b. 650,000 c. 560,000 d. P0
7. Bitter Company acquired a machinery on April 1, 2019.
Cost 1,200,000
Residual value 120,000
Estimated useful life 8 years

What is the depreciation for 2019 using sum of years’ digits?

a. 180,000 b. 240,000 c. 120,000 d. 160,000

What is the depreciation for 2020 using sum of years’ digits?

a. 157,500 b. 217,500 c. 210,000 d. 105,000

What is the depreciation for 2019 using double declining balance?

a. 300,000 b. 150,000 c. 225,000 d. 202,500

What is the depreciation for 2020 using double declining balance?

a. 270,000 b. 135,000 c. 243,750 d. 150,000

8. On January 1, 2019, Domino Company purchased a new machine for 4,000,000. The new machine has an estimated
useful life of eight years and the residual value was estimated to be 400,000. Depreciation was computed on the sum of
the years’ digits method. What is the carrying amount of the machine on December 31, 2020?
a. 2,100,000 b. 2,500,000 c. 1,150,000 d. 3,300,000

9. On January 1, 2018 Mogul Company acquired equipment to be used in the manufacturing operations. The equipment
has an estimated useful life of 10 years and an estimated residual value of 50,000. The depreciation applicable to this
equipment was 240,000 for 2020 computed under the sum of years’ digits method. What was the acquisition cost of the
equipment?
a. 1,650,000 b. 1,700,000 c. 2,400,000 d. 2,450,000

10. On April 1, 2018, Kingdom Company purchased new machinery for 3,000,000. The machinery has an estimated
useful life of five years and depreciation is computed by sum of years’ digits method. What is the accumulated
depreciation of the machinery on March 31, 2020?
a. 1,920,000 b. 1,800,000 c. 1,200,000 d. 1,000,000

11. Sarastic Company takes a full depreciation expense in the year of acquisition, and no depreciation expense in the year
of disposition. An asset was acquired in 2017.
Cost 1,100,000
Residual value 200,000
Accumulated depreciation – Jan. 1, 2020 720,000
Estimated useful life 5 years

Using the same method in 2017, 2018 and 2019, what depreciation expense should be recorded in 2020?
a. 120,000 b. 180,000 c. 220,000 d. 240,000

12. Iceberg Company purchased equipment which was installed and put into service January 1, 2019 at a total cost of
1,280,000. Residual value was estimated at 80,000. The equipment is being depreciated over eight years by the double
declining balance method. What amount of depreciation should be recorded for 2020?
a. 225,000 b. 240,000 c. 300,000 d. 320,000

13. On January 1, 2019, Contour Company acquired an equipment to be used in operations. The equipment has a useful
life of 8 years and residual value of 300,000. The depreciation applicable to the equipment was 900,000 for 2020
computed under the double declining balance method. What was the acquisition cost of the equipment?
a. 3,600,000 b. 4,500,000 c. 4,800,000 d. 5,100,000

14. Ambitious Company showed the following schedule of depreciable assets on January 1, 2020.
Asset Cost Accumulated Acquisition Residual
depreciation date value
A 4,000,000 2,560,000 2018 400,000
B 2,000,000 1,440,000 2017 200,000
C 2,800,000 1,344,000 2017 560,000
The useful life of each asset is 5 years. The entity takes a full depreciation in the year of acquisition and no depreciation in
the year of disposition. Asset C was sold for 1,700,000 on June 30, 2020. Asset A is depreciated under the double
declining method.
What is the depreciation of Asset A for 2020?
a. 1,600,000 b. 1,440,000 c. 416,000 d. 576,000

What is the depreciation of Asset B for 2020 assuming same method in prior years?
a. 240,000 b. 480,000 c. 360,000 d. 400,000

What is the gain on sale of Asset C?

a. 244,000 b. 464,000 c. 356,000 d. 804,000

15. Tarnish Company purchased equipment on January 1, 2018 for 5,000,000. The equipment had an estimated 5-year
useful life. The accounting policy for 5-year assets is to use the 200% double declining balance method for the first two
years of the asset’s life and then switch to straight line depreciation. On December 31, 2020, what amount should be
reported as accumulated depreciation?
a. 3,000,000 b. 3,800,000 c. 3,920,000 d. 4,200,000

16. Saga Company purchased a machinery on January 1, 2017 for 7,200,000. The machinery had useful life of 10 years
with no residual value and was depreciated using the straight line method. In 2020, a decision was made to change the
depreciation method from straight line to sum of years’ digits. The estimate of useful life and residual value remained
unchanged. What is the depreciation for the current year?
a. 1,260,000 b. 1,440,000 c. 916,360 d. 720,000

17. On January 1, 2018, Bride Company purchased for 2,400,000 a machine with a useful life of ten years and no residual
value. The machine was depreciated by the double declining balance method. The entity changed to the straight line
method on January 1, 2020. What is the depreciation for the current year?
a. 153,600 b. 192,000 c. 240,000 d. 307,200

18. On January 1, 2019, Layman Company purchased personal computers for 6,000,000. The management estimated that
the computers would last approximately 4 years with residual value of 600,000. The entity used the double declining
balance method. During January 2020, the management realized that technological advancement had made the computers
virtually obsolete and proposed changing the remaining useful life to 2 years. What amount of depreciation should be
recognized for 2020?
a. 3,000,000 b. 2,400,000 c. 1,500,000 d. 1,200,000

19. Spiderman Company purchased a machine on January 1, 2017 for 3,760,000. The machine was estimated to have a
useful life of five years and a residual value of 240,000. The entity used the sum of years’ digits method of depreciation.
At the beginning of 2020, the entity determined that the total useful life of the machine should have been four years and
the residual value is 352,000. What amount should be recorded as depreciation for 2020?
a. 192,000 b. 444,000 c. 592,000 d. 704,000

20. Superman Company acquired a machine on January 1, 2018 for 10,000,000. The machine had an 8-year useful life
with a 1,000,000 residual value and was depreciated using the sum of years’ digits method. In January 2020, the entity
estimated that the asset’s useful life from the date of acquisition should have been 6 years and the residual value is
400,000. What is the accumulated depreciation on December 31, 2020?
a. 5,212,500 b. 6,090,000 c. 4,400,360 d. 6,250,000

21. Patterson Company provided the following information on January 1, 2019:

Vehicle cost 5,000,000 Actual miles driven:
Useful life in years 5 2019 30,000
Useful life in miles 100,000 2020 20,000
Residual value 1,000,000 2021 15,000

What is the depreciation for 2021 using the SYD method?

a. 1,000,000 b. 1,333,000 c. 800,000 d. 600,000

What is the accumulated depreciation on December 31, 2020 using the double declining balance method?
a. 1,200,000 b. 1,600,000 c. 2,560,000 d. 3,200,000

What is the accumulated depreciation on December 31, 2021 using the miles driven?
a. 2,000,000 b. 2,600,000 c. 800,000 d. 600,000