RonJan Co. had the following amounts for its PPE (all of which were purchased on 1 January 2020) for the year ended 2020:

The company uses the straight line depreciation method to depreciate its buildings, machinery and equipment, land improvements, and company cars, which all have a useful life of five (5) years.

The following transactions occurred during 2021:

1. A warehouse was purchased on 1 January 2021 for Php2,000,000.00. Fifty percent (50%) of the amount was allocated to building with the remaining to Land.
2. Land improvements such as parking spaces, fences and walls were constructed on 1 February 2021 at an amount of Php1,000,000.00.
3. Machinery and equipment were purchased on 1 July 2021 at a total invoice price of P2,500,000.00. Delivery fee and installation costs amounted to P100,000 and P400,000 were also incurred, respectively.
4. On 1 August 2021, company cars were purchased. RonJan Co. spent Php500,000.00 for this transaction.
5. On 1 October 2021, company cars in the amount of Php1,000,000.00 were sold for Php880,000.00. These company cars had an accumulated depreciation of 350,000.00 as of the date of sale.
6. Machineries in the amount of Php400,000.00 were scrapped on 31 December 2021. These machineries had an accumulated depreciation of Php160,000.00 as of the date of scrapping.

required:

1. Compute the depreciation expense for 2021

2. How much is the gain on sale to be recognized?

3. How much is total accumulated depreciation?

4. How much is the loss on disposition as a result of the scrapping of machinery to be recognized in the 2021 P/L Statement?
 

Transcribed Image Text:

Land Buildings Machinery and Equipment Company Cars Cost Php5,000,000.00 Php 10,000,000.00 Php8,000,000.00 Php2,000,000.00 Accumulated Depreciation Php2,000,000.00 Php1,600,000.00 Php400,000.00 Land Buildings Machinery and Equipment Company Cars Cost Php5,000,000.00 Php 10,000,000.00 Php8,000,000.00 Php2,000,000.00 Accumulated Depreciation Php2,000,000.00 Php1,600,000.00 Php400,000.00

Answer rating: 100% (QA)

1 Depreciation Expense for 2021 Buildings Php200000000 x 15 Php400000... View the full answer