Solve the given problem: (Show your complete solution) A mentally deranged employee, Mr. Arson, put a torch to a factory on February 20, 2018. The resulting fire completely destroyed the plant and its contents. Fortunately, certain accounting records were kept in another building. They revealed the following for the period December 31, 2017 to February 20, 2018: Prime cost, P301,000 Gross Profit, P100,000 or 20% of sales Cost of Goods Available for Sale, P460,000 Direct Materials purchased, P170,000 Work in process, December 31, 2017, P34,000 Direct materials, December 31, 2017, P16,000 Finished Goods, December 31, 2017, P30,000
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- On June 30, 2016, a fire in Jeremy Company's plant caused the total loss of a production machine. The machine was being depreciated at P20,000 annually. And had a carrying amount of P160,000 on December 31, 2015. On the date of the fire, the fair value of the machine was P220,000 and Jeremy received insurance proceeds of P200,000 in October 2016. In its income statement for the year ended December 31, 2016, what amount should Jeremy recognize as a gain or loss on disposition? Answer:Al Aznar Company is manufacturer of furniture. At the end of 2018, they have inventory worth $ 14500 and out of that $ 4500 worth inventory is damaged. The company decided to repair the inventory and sell it for 3500. The repair cost is $ 500.1. When do a company write down its inventory value (cost) to the Net Realizable Value?2. Imagine that the company decided to sell the damaged inventory for $ 3200 without spending any amount for repairing, how much amount need to write off from the value of inventory at the end of the period?Wildhorse Inc. recently replaced a piece of automatic equipment at a net price of $5,360, f.o.b. factory. The replacement was necessary because one of Wildhorse’s employees had accidentally backed his truck into Wildhorse’s original equipment and made it inoperable. Because of the accident, the equipment had no resale value to anyone and had to be scrapped. Wildhorse’s insurance policy provided for a replacement of its equipment and paid the price of the new equipment directly to the new equipment manufacturer, minus the deductible amount paid to the manufacturer by Wildhorse. The $5,360 that Wildhorse paid was the amount of the deductible that it has to pay on any single claim on its insurance policy. The new equipment represents the same value in use to Wildhorse. The used equipment had originally cost $64,800. It had a book value of $48,000 at the time of the accident and a second-hand market value of $55,020 before the accident, based on recent transactions involving similar…
- Pharoah Inc. recently replaced a piece of automatic equipment at a net price of $4,030, f.o.b. factory. The replacement was necessary because one of Pharoah’s employees had accidentally backed his truck into Pharoah’s original equipment and made it inoperable. Because of the accident, the equipment had no resale value to anyone and had to be scrapped. Pharoah’s insurance policy provided for a replacement of its equipment and paid the price of the new equipment directly to the new equipment manufacturer, minus the deductible amount paid to the manufacturer by Pharoah. The $4,030 that Pharoah paid was the amount of the deductible that it has to pay on any single claim on its insurance policy. The new equipment represents the same value in use to Pharoah. The used equipment had originally cost $65,800. It had a book value of $46,600 at the time of the accident and a second-hand market value of $52,730 before the accident, based on recent transactions involving similar equipment. Freight…Pharoah Inc. recently replaced a piece of automatic equipment at a net price of $4,030, f.o.b. factory. The replacement was necessary because one of Pharoah’s employees had accidentally backed his truck into Pharoah’s original equipment and made it inoperable. Because of the accident, the equipment had no resale value to anyone and had to be scrapped. Pharoah’s insurance policy provided for a replacement of its equipment and paid the price of the new equipment directly to the new equipment manufacturer, minus the deductible amount paid to the manufacturer by Pharoah. The $4,030 that Pharoah paid was the amount of the deductible that it has to pay on any single claim on its insurance policy. The new equipment represents the same value in use to Pharoah. The used equipment had originally cost $65,800. It had a book value of $46,600 at the time of the accident and a second-hand market value of $52,730 before the accident, based on recent transactions involving similar equipment. Freight…Paradise, a manufacturer located in rural New Brunswick, purchased a widget-making machine in2017 and depreciated it using the double-declining-balance method. As at Paradise’s fiscal year-end in2021 (March 31, 2021), the net book value of the widget-making machine was $500,000.On March 31, 2021, Paradise realized that there were breakthroughs in widget manufacturing whichwould put their machine into obsolescence in exactly 7 years. The widget-making machine wasappraised to have a fair value of $400,000; costs of disposal of $15,000; future discounted netcashflows of $415,000; and future undiscounted net cashflows of $450,000.Paradise plans to use the machine for the next 7 years while it invests in research and development(R&D) to construct an in-house piece of widget-making equipment. Starting on April 1, 2021, however,Paradise will switch to the straight line method of depreciation.Required(a) If required, prepare the journal entry(ies) in good form to record impairment loss…
- A fire at the factory on 1 October 2018 damaged the machine leaving it with a lower operatingcapacity. The accountant considers that Phoenix Ltd (Phoenix) will need to recognise animpairment loss in relation to this damage. The accountant has ascertained the followinginformation at 1 October 2018:- Phoenix adopts cost model to account for the machine.- The carrying amount of the machine is $60,750.- An equivalent new machine would cost $90,000.- The machine could be sold in its current condition for a gross amount of $45,000.Dismantling costs would amount to $2,000.- In its current condition, the machine could operate for three more years which gives it avalue in use figure of $38,685.1) In accordance with HKAS 36 ‘Impairment of Assets’, which of the following woulddefinitely NOT be an indicator of the potential impairment of an asset (or group ofassets)?A An unexpected fall in the market value of one or more assetsB Adverse changes in the economic performance of one or more assetsC A…Allegiance, Inc. has $125,000 of inventory that suffered minor smoke damage from a fire in the warehouse. The company can sell the goods "as is" for $45,000; alternatively, the goods can be cleaned and shipped to the firm's outlet center at a cost of $23,000. There the goods could be sold for $80,000. What alternative is more desirable and what is the relevant cost for that alternative?Blossom Inc. recently replaced a piece of automatic equipment at a net price of $3,500, f.o.b. factory. The replacement was necessary because one of Blossom’s employees had accidentally backed his truck into Blossom’s original equipment and made it inoperable. Because of the accident, the equipment had no resale value to anyone and had to be scrapped. Blossom’s insurance policy provided for a replacement of its equipment and paid the price of the new equipment directly to the new equipment manufacturer, minus the deductible amount paid to the manufacturer by Blossom. The $3,500 that Blossom paid was the amount of the deductible that it has to pay on any single claim on its insurance policy. The new equipment represents the same value in use to Blossom. The used equipment had originally cost $64,000. It had a book value of $45,000 at the time of the accident and a second-hand market value of $50,000 before the accident, based on recent transactions involving similar equipment. Freight…
- Baltimore Manufacturing Corporation (BMC) incurred the below expenditure for 2020 for the manufacture of portable heaters. During the year 2020, BMC suffered flood damages, and as a results, all raw materials were totally damaged. BMC was able to calculate the amounts for all the other cost elements except the raw materials used. 2A. Consequently, BMC has engaged you, a forensic accountant, to compute the amount recoverable from its insurance company for raw materials used (Show your work below). Direct labor…………………………………………………….$60,000 Factory Foremen wages………………………………………..$32,000 Raw materials used for manufacturing…………………………$27,000 Purchases of raw materials……………………………………...$18,000 Import duties on raw materials…………………………………$7,000 Freight-in on raw materials……………………………………..$4,500 Factory overhead costs………………………………………….$3,000PLEASE DO ALL REQUIREMENTS WITH WORKING More info 1. On February 1, Braun sold the vehicles to Direct Produce, Inc. for$20,000. 2. On March 31, all of Braun's equipment and machinery was destroyed by a fire in one of its facilities. 3. On May 1, the equipment was replaced at a cost of$570,000and the machinery cost the company$318,400to replace. The estimated useful lives and residual values remained the same as specified for the original machinery and equipment. The company paid cash for the new assets.Horizon Corporation manufactues personal computers. The company began operations in 2012 and reported profits for the years 2012 through 2019. Due primarily to increased competition and price slashing in the industry, 2020's income statement reported a loss of $20 million. Just before the end of 2021 fiscal year, a memo from the company's chief financial officer (CFO) to Jim Fielding, the company controller, included the following comments: "If we dont do something about the large amount of unsold computers already manufactured, our auditors will require us to record a write-down. The resulting loss for 2021 will cause a violation of our debt convenants and force the company into bankruptcy. I suggest that you ship half of out inventory to J.B. Sales, Inc., in Oklahoma City. I know the company's presdient, and he will accept the inventory and acknowledge the shipment as a purchase. We can record the sale in 2021 which will boost our loss to a profit. Then J.B. Sales will simply return…