Course Output 01

You are the Accountant of Conjuring Company. On January 1, 2020, the first day of the first year of
operations, the company acquired a Machine for P225,555,000 with an estimated useful life of 10
years and an estimated residual value of P12,555,000 and is deciding whether what method of
depreciation should the company will employ for depreciating the asset.

You are tasked to prepare working papers showing schedules of computations of depreciation and
carrying amount of the Machine, that the company had acquired, under the following methods of
depreciation.
a. Straight-line method
b. Output method
c. Working hours method
d. Sum-of-the-year’s digits method
e. 150% Declining balance method
f. 200% Declining balance method

Below shows the schedule of projected hours to be used and the corresponding output in units to be
produced per year for the company.

Year Working hours Production

2020 96,000 400,500
2021 97,000 380,000
2022 97,500 370,000
2023 97,500 362,400
2024 97,500 320,500
2025 98,000 280,200
2026 98,500 260,600
2027 101,000 240,000
2028 105,500 200,200
2029 111,500 185,600

The company is certain that they will meet the projected figure provided above.

The company is also requesting for a recommendation on what method to be used by providing a
recommendation statement (in business correspondence form / letter) at the last part of the working
papers on a separate sheet.

REQUIREMENTS:
1. Prepare depreciation schedules for all methods mentioned above.
2. Prepare a letter to management for the “recommendation statement”

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 Output 01 Formats

Use the following guide formats in making your outputs.

On depreciation schedules:
Use the following format for depreciation schedule computations:

YEAR PARTICULARS DEPRECIATION ACCUMULATED CARRYING

DEPRECIATION AMOUNT
2020
2021
2022
2023
(continued)
up to 2029

Notes:
Round off all figures calculated to the nearest one peso, if any.
Supplement the format with appropriate headings.

On the letter to management:

In your letter to the management of Conjuring Company, on recommendation state all your arguments
on why you chose the depreciation method as appropriate for the item of property, plant and
equipment. Also state why other methods would not be appropriate if they were to be adopted.

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