Scribd
Upload
591 views

Espresso

Espresso Company operates a factory with knitting machines that are depreciated at 10% per year. During the 2021-2022 period, Espresso acquired a new machine for $150,000 that replaced two older machines, one of which was traded in. An older machine was also retired and sold for scrap. Another machine required a $48,000 motor repair to increase its life by two years. A new $12,000 arm was added to a machine to add special designs that can be used on other machines for 15 years.

Uploaded by

Carl Dhaniel Garcia Salen
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
591 views

Espresso

Espresso Company operates a factory with knitting machines that are depreciated at 10% per year. During the 2021-2022 period, Espresso acquired a new machine for $150,000 that replaced two older machines, one of which was traded in. An older machine was also retired and sold for scrap. Another machine required a $48,000 motor repair to increase its life by two years. A new $12,000 arm was added to a machine to add special designs that can be used on other machines for 15 years.

Uploaded by

Carl Dhaniel Garcia Salen
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
You are on page 1/ 1

Espresso Company operates a factory that contains a large number of machines designed to

produce knitted garments. These machines are generally depreciated at 10% per annum on a
straight-line basis. In general, machines are estimated to have a residual value on disposal of
10% of cost. At July 1, 2021, Espresso Company had a total of 64 machines, and the balance
sheet showed a total cost of P4,200,000 and accumulated depreciation of P1,300,000. During the
2021-2022 period, the following transactions occurred:

1. On September 1, 2021, a new machine was acquired for P150,000. This machine
replaced two other machines. One of the two replaced machine was acquired on July 1,
2018 for P82,000. It was traded in on the new machine, with Espresso, Inc. making a
cash payment of P88,000 on the new machine. The second replaced machine had a cost
of P90,000 on April 1, 2019 and was sold for P73,000.

2. On January 1, 2022, a machine that had cost of P40,000 on July 1, 2019 was retired from
use and sold for scrap for P5,000.

3. On January 1, 2022, a machine that had been acquired on January 1, 2019 for P70,000
was repaired because its motor had been damaged from overheating. The motor was
replaced at a cost of P48,000. It was expected that this would increase the life of the
machine by an extra two years.

4. On April 1, 2022, Espresso Company fitted a new form of arm to a machine used for
putting special designs onto garments. The arm cost P12,000. The machine had been
acquired on April 1, 2019 for P100,000. The arm can be used on a number of other
machines when required and has a 15-year life. It will not be sold when any particular
machine is retired, but retained for use on other machines.

The reporting date is June 30.

The depreciation expense on all machines for the year ending June 30, 2022 amounted to:
376,560

You might also like