# Accounting

Plant, Property and Equipment: Depreciation and Disposal

Problem 18-14:   (Depreciation -150% Declining Balance Method)

Wishful Company purchased a machine for P600,000 on January 2,2007. The machine has an estimated useful life of five years and a salvage value of P60,000. Depreciation was computed by the 150%-declining balance method.

How much should be the accumulated depreciation balance at December 31, 2008?
a) P216,000 c) P294,000
b) P275,000 d) P306,000

|Straight line rate                   |=           |100%             |÷     |5 years       |=   |20%           |
|150%-declining rate                   |=           |20%             |×     |150%         |=   |30%           |

|Depreciation in 2007 (P600,000 × 30%)                                                   |P180,000           |
|Depreciation in 2008 (P600,000 – P180,000 × 30%)                                         |126,000           |
|Total accumulated depreciation                                                           |P306,000           |

Problem   18-15: (Depreciation – Change in Method)
Faithful Company purchased an equipment on January 2,2007 for P3,000,000. The equipment had an estimated useful life of 5 years. The company’s policy is to depreciate the asset using the 200%-declining balance in the first two years of the asset’s life and then switch to the straight- line method for the remaining useful life of the asset.

What is the total accumulated depreciation as of December 31, 2009?
a) P1, 800,000 c) P2, 352,000
b) P2, 280,000 d) P2, 520,000