Name: Score:

Section: Date:
Quiz No. 1

Andres Corporation purchased land for 6,000,000. The Company expected

to extract 1 million tons of mine from this land over the next 20
years at which time, residual value shall be zero. During the first 2
years of the mine’s operations, 30,000 tons were mined each year and
sold for P80 per ton. The estimate of the total remaining capacity of
the mine was raised to 1,200,000 tons at the start of the third year
and the residual value was estimated to be P480,000. During the third
year, 50,000 tons were mined and sold for P85 per ton.
How much would be the depletion for the third year?
a. 215,000 c. 225,000
b. 227,500 d. 235,000

Bonifacio Co. purchased 4 convenience store buildings on January 1,

2003 for a total of 22,000,000. The buildings have been depreciated
using the straight line method with 20-year useful life and 5%
residual value. As of January 1, 2010, Bonifacio has converted the
buildings into internet learning centers. Because of the change in the
use of the buildings, Bonifacio is evaluating the buildings for
possible impairment. Bonifacio estimates that the buildings have a
remaining useful life of 10 years and that their residual value will
be zero and net cash inflow from each building will be 500,000 per
year and appropriate discount rate that reflects current market
assessments of time value of money is 12%. Present value of annuity or
the discount rate for 10 periods is 5.65. The fair value less cost to
sell of the four buildings is not clearly determinable.
What amount of impairment loss, if any, should be recognized?
a. None c. 4,435,000
b. 3,385,000 d. 5,560,000
Below are the historical cost balances of Property, Plant and
Equipment of Jose Company at January 1, 2014:

Land 14,000,000
Buildings and improvements 84,000,000
Machinery and equipment 112,000,000
Total 210,000,000
Accumulated Depreciation:
Buildings and improvements 10,500,000
Machinery and equipment 28,000,000 38,500,000
Net book value 171,500,000

An appraisal was made for all of Jose’s PPE on the same date. The
appraisal report disclosed the following:
Fair Values Remaining Useful Life
Land 28,000,000
Buildings and Improvements 126,000,000 18 years
Machinery and equipment 126,000,000 7 years

There were no additions or disposals during 2014. Depreciation

expenses is computed based on a straight line method. The estimated
useful life applied to buildings and improvements was 20 years and 10
years for machinery and equipment. The appraisal was recorded by Jose
on December 15, 2014 only.
How much should be the depreciation expense of Jose for the year ended
December 31, 2014?
a. 15,400,000 c. 20,800,000
b. 18,900,000 d. 25,000,000

On January 1, 2014, Rizal Company bought machinery under a contract

that required a down payment of 50,000, plus 24 monthly payments of
25,000 each, for total cash payments of 650,000. The cash price
equivalent of the machinery was 550,000. The machinery has an
estimated useful life of 10 years and estimated salvage value of
25,000. Rizal uses the straight line method of depreciation.
How much should Rizal report in its 2014 profit or loss as
depreciation for the machinery?
a. 52,500 c. 62,500
b. 55,000 d. 65,000

Apolinario Company purchased an equipment for 540,000 on January 2,

2013. The equipment has an estimated salvage value of 60,000 and an
estimated useful life of 5 years. The equipment is being depreciated
using the sum of years digits method.

What is the carrying amount of the equipment on December 31, 2014?

a. 156,000 c. 380,000
b. 252,000 d. 412,000

On January 3, 2013, Mabini Company purchased factory equipment for

4,000,000. Estimated salvage value was 160,000. Estimated useful life
is 10 years and will be depreciated using double declining balance
method.
What amount of depreciation to be recognized in year 2014?
a. 384,000 c. 640,000
b. 614,400 d. 768,000