The management of Petro Garcia Inc. was discussing whether certain equipment should be written off as a charge to current operations because of obsolescence. This equipment has a cost of $900,000 with depreciation to date of $400,000 as of December 31, 2020. On December 31, 2020, management projected its future net cash flows from this equipment to be $300,000 and its fair value to be $230,000. The company intends to use this equipment in the future. Where should the gain or loss (if any) on the write-down be reported in the income statement?
Q: A Project Manager (PM) wants to price out the cost for her project for the use of a piece of…
A: All expenses related to a project's conception, preparation, and execution that are reasonable…
Q: Prepare the cash flows from operating activities section of the statement of cash flows for Parnell…
A: The cash flow statement is either made on the basis of the direct and indirect method by these…
Q: Accounts Payable AA Losses due to fire B Accounts Receivable BB Merchandise Inventory E Accumulated…
A: Journal entries refer to the recording of transactions in the debit and credit format which can be…
Q: Don't give answer in image format
A: Subscription and Delinquency of Shares A way for a business to raise money. The general public is…
Q: Oriole Company manufactures products ranging from simple automated machinery to complex systems…
A: A performance obligation is a commitment made in a legally enforceable agreement with a buyer to…
Q: Snapper Tool Company has plenty of excess capacity to accept a special order. Shown below is an…
A: Operating profit refers to the profit made by the company before subtracting the value of…
Q: Whirl Wind Games, Inc. is a new corporation started on January 1, 2022. The following transactions…
A: Journal Entry :— It is an act of recording transaction in books of account when transaction…
Q: Peanut Company acquired 90 percent of Snoopy Company's outstanding common stock for $279,000 on…
A: Equity method is used to report investment of a company in another company. It is used in both US.…
Q: William Jackson, the CEO of RPL, has requested that the tests of controls only be performed once due…
A: Audit Evidence Evidence gained for a company's financial transactions, internal control procedures,…
Q: ow much do the employer and employee pay for Medicare each monthly pay period for (a) Ana, (b)…
A: Medicare tax refers to the tax which states the percentage of the gross wages that all the…
Q: atena's Marketing Company has the following adjusted trial balance at the end of the current year.…
A: A balance sheet is a type of statement that proves the establishment of the accounting equation by…
Q: Use the relevant items from the list below to prepare the balance sheet for Company ODC as at 31…
A: A balance sheet shows a company's operating and financial position over a specific period of time,…
Q: Required a. Record the events in a statements model shown below. b. Prepare an income statement, a…
A: Financial statements are the documents of a company that shows its activities and the financial…
Q: udds Company purchased a new plant asset on April 1, 2020, at a cost of $711,000. It was estimated…
A: The depreciation expense is charged on fixed assets as reduction in the value of the fixed assets…
Q: Use the relevant items from the list below to prepare the balance sheet for Company ODC as at 31…
A: Balance sheet is the financial statement which is prepared by the entity for the purpose of…
Q: You work as a freelance accounting professional and have been recently engaged by the auditors of…
A: Financial statements are written records that detail a company's operations and financial…
Q: Tom Scott is the owner, president, and primary salesperson for Scott Manufacturing. Because of this,…
A: Every company runs a business, but in order to run a business efficiently, a company needs proper…
Q: Company received rent of $15,000 for six months for a portion of the on November 1, 2020. Provide…
A: Adjusting entry is the journal entry which is passed at the end of reporting period to adjust the…
Q: What is your net dollar sales projection for this year? Net sales
A: In business, revenues and expenses are forecasted in order to make suitable plans and policies.…
Q: Complete the January 31, 20__, balance sheet of Countrywide Legal Services using the following…
A: Answer:- Balance sheet:- An organization's assets, liabilities and shareholder's equity are listed…
Q: A new store manager has been provided with performance measures for his evaluation. As he reviews…
A: There are many types of cost incurred during manufacturing process. Such as direct cost ,…
Q: Dawls Corporation reported stockholders' equity on December 31 of the prior year as follows: Common…
A: A journal entry is a form of accounting entry that is used to report a business transaction in a…
Q: Completing the Payroll Register The Employee Payroll Register presents all the computations…
A: The payroll process is related to calculating the gross pay, all the applicable taxes, allowed…
Q: Post the above transactions to T-accounts. Required 1 Required 2 Beginning balance Ending balance b.…
A: Adjusted Cost of Goods Sold - Cost of Goods Sold includes the cost incurred to sell goods to the…
Q: "Our auditors identified the following critical audit matter: Significant judgment may be required…
A: ANSWER:- c) 10-k Explanation For correct option:- The 10-K is an annual report that is required to…
Q: For each transaction below, calculate the amount of revenue to be recognized in the current period…
A: INTRODUCTION: Accrual accounting is a technique of accounting in which income or costs are recorded…
Q: Taylor, age 18, is claimed as a dependent by her parents. For 2022, she has the following income:…
A: The standard deduction allows taxpayers to reduce their taxable income by a predetermined monetary…
Q: im Arnold began a business called Amold's Shoe Repair, 1. Complete the T accounts for Cash;…
A: T accounts are the type of account that shows the presentation of double entry system. The another…
Q: Sun Co.'s monthly data for the past year follow. Management wants to use these data to predict…
A: High-low method is one of the methods to separate the variable cost and fixed cost from the mixed…
Q: Journalizing the entry for a job completed would include a debit to a.Work in Process b.Factory…
A: Businesses can keep track of the costs associated with certain jobs thanks to a system known as job…
Q: Exercise 3-6 (Algo) Schedules of Cost of Goods Manufactured and Cost of Goods Sold; Income Statement…
A: The schedule used to determine the cost of producing things over a certain length of time is…
Q: 1. Calculate Computron’s market value ratios—that is, its price/earnings ratio and its market/book…
A: Analysis of Financial Performance The practice of assessing a company's financial statements and…
Q: physical flow of inventory
A: Inventory valuation is essential for any business to figure out the correct net income and balance…
Q: [The following information applies to the questions displayed below.]
A: Cash flow statement represents the cash inflow and cash outflow of the company that involves the…
Q: On December 31, 20X8, Paragraph Corporation acquired 80 percent of Sentence Company's common stock…
A: Consolidated financial statements are group financial statements of subsidiaries and parent company.…
Q: Emilio Co. had the following information relating to its accounts receivable: Accounts receivable,…
A: The allowance for doubtful accounts is created to record estimated bad debt expense for the period.…
Q: a. Clem is self-employed, and this year he incurred $1,000 in expenses for tools and supplies…
A: AGI AGI is an abbreviated form of Adjusted Gross Income which is computed after claiming allowed…
Q: Assume Down, Incorporated, was organized on May 1 to compete with Despair, Incorporated-a company…
A: Balance sheet is one of most important financial statements under double entry accounting system.…
Q: On January Corporation 1, 2021, Sole Man Shoe Repair issued 16,000 of its 9%, $1,000 bonds at 97.…
A: Bonds payable is one of the liability of the business on which regular interest payments needs to be…
Q: Phil owns a ranch business and uses four-wheelers to do much of his work. Occasionally, though, he…
A: Formula used: Allowable depreciation for year 1=Business travel expense×Depreciation rate according…
Q: Current Attempt in Progress Concord Corp, a private corporation, received its articles of…
A: "Since you have asked multiple questions, we will solve first question for you. If you want any…
Q: Question 4) On November 1, Riedemann Marketing Co. was started with an initial investment in the…
A: Lets understand the basics. Statement of financial position gets prepared through various steps. (1)…
Q: Wright Lighting Fixtures forecasts its sales in units for the next four months as follows: March…
A: Given data: Sales forecasts: March 22,000 April 24,000 May 21,500 June 20,000
Q: Bellingham Company produces a product that requires 2.3 standard pounds per unit. The standard price…
A: Material variances are the differences between the cost estimated for material and the cost actually…
Q: Required information [The following information applies to the questions displayed below.] Martinez…
A: VARIABLE COST Variable Cost is a cost that varies with the level of output. variable costs…
Q: Project 1: Stockholders' Equity (10 points) Required: Answer the questions on the following page in…
A: Stockholder's Equity -Stockholder's Equity includes the amount contributed by shareholders issued in…
Q: On October 1, 2024, Microchip lent $99,000 to another company. A note was signed with principal and…
A: A journal entry is a form of accounting entry that is used to report a business transaction in a…
Q: On January 1, Year 2, Kincaid Company's Accounts Receivable and the Allowance for Doubtful Accounts…
A: Uncollectible Expense :— It is the amount of receivable that are not collected from customer. It is…
Q: A company issues $16700000, 9.8%, 20-year bonds to yield 10% on January 1, 2022. Interest is paid on…
A: Bond :— It is one of the type of securities that pays fixed periodic interest and face value amount…
Q: accounting policies
A: Accounting policies mean the set of principles laid down by a venture’s management. These policies…
The management of Petro Garcia Inc. was discussing whether certain equipment should be written off as a charge to current operations because of obsolescence. This equipment has a cost of $900,000 with
Where should the gain or loss (if any) on the write-down be reported in the income statement?
When an asset's value drops, it will suffer an impairment loss.
Step by step
Solved in 2 steps
- Gray Companys financial statements showed income before income taxes of 4,030,000 for the year ended December 31, 2020, and 3,330,000 for the year ended December 31, 2019. Additional information is as follows: Capital expenditures were 2,800,000 in 2020 and 4,000,000 in 2019. Included in the 2020 capital expenditures is equipment purchased for 1,000,000 on January 1, 2020, with no salvage value. Gray used straight-line depreciation based on a 10-year estimated life in its financial statements. As a result of additional information now available, it is estimated that this equipment should have only an 8-year life. Gray made an error in its financial statements that should be regarded as material. A payment of 180,000 was made in January 2020 and charged to expense in 2020 for insurance premiums applicable to policies commencing and expiring in 2019. No liability had been recorded for this item at December 31, 2019. The allowance for doubtful accounts reflected in Grays financial statements was 7,000 at December 31, 2020, and 97,000 at December 31, 2019. During 2020, 90,000 of uncollectible receivables were written off against the allowance for doubtful accounts. In 2019, the provision for doubtful accounts was based on a percentage of net sales. The 2020 provision has not yet been recorded. Net sales were 58,500,000 for the year ended December 31, 2020, and 49,230,000 for the year ended December 31, 2019. Based on the latest available facts, the 2020 provision for doubtful accounts is estimated to be 0.2% of net sales. A review of the estimated warranty liability at December 31, 2020, which is included in other liabilities in Grays financial statements, has disclosed that this estimated liability should be increased 170,000. Gray has two large blast furnaces that it uses in its manufacturing process. These furnaces must be periodically relined. Furnace A was relined in January 2014 at a cost of 230,000 and in January 2019 at a cost of 280,000. Furnace B was relined for the first time in January 2020 at a cost of 300,000. In Grays financial statements, these costs were expensed as incurred. Since a relining will last for 5 years, Grays management feels it would be preferable to capitalize and depreciate the cost of the relining over the productive life of the relining. Gray has decided to nuke a change in accounting principle from expensing relining costs as incurred to capitalizing them and depreciating them over their productive life on a straight-line basis with a full years depreciation in the year of relining. This change meets the requirements for a change in accounting principle under GAAP. Required: 1. For the years ended December 31, 2020 and 2019, prepare a worksheet reconciling income before income taxes as given previously with income before income taxes as adjusted for the preceding additional information. Show supporting computations in good form. Ignore income taxes and deferred tax considerations in your answer. The worksheet should have the following format: 2. As of January 1, 2020, compute the retrospective adjustment of retained earnings for the change in accounting principle from expensing to capitalizing relining costs. Ignore income taxes and deferred tax considerations in your answer.At the end of 2020, Magenta Manufacturing Company discovered that construction cost had been capitalized as a cost of the factory building in 2015 when it should have been treated as a cost of production equipment installation costs. As a result of the misclassification, the depreciation through 2018 was understated by 110,000, and depreciation for 2019 was understated by 90,000. What would be the consequences of correcting for the misclassification of the property cost? a. The taxpayer uses the FIFO inventory method, and 25% of goods produced during the period were included in the ending inventory. b. The taxpayer uses the LIFO inventory method, and no new LIFO layer was added during 2019.The management of Petro Garcia Inc. was discussing whether certain equipment should be written off as a charge to current operations because of obsolescence. This equipment has a cost of $900,000 with depreciation to date of $400,000 as of December 31, 2020. On December 31, 2020, management projected its future net cash flows from this equipment to be $300,000 and its fair value to be $230,000. The company intends to use this equipment in the future. At December 31, 2021, the equipment’s fair value increased to $260,000. Prepare the journal entry (if any) to record this increase in fair value.
- The management of Petro Garcia Inc. was discussing whether certain equipment should be written off as a charge to current operations because of obsolescence. This equipment has a cost of $900,000 with depreciation to date of $400,000 as of December 31, 2020. On December 31, 2020, management projected its future net cash flows from this equipment to be $300,000 and its fair value to be $230,000. The company intends to use this equipment in the future. What accounting issues did management face in accounting for this impairment?The management of Petro Garcia Inc. was discussing whether certain equipment should be written off as a charge to current operations because of obsolescence. This equipment has a cost of $900,000 with depreciation to date of $400,000 as of December 31, 2020. On December 31, 2020, management projected its future net cash flows from this equipment to be $300,000 and its fair value to be $230,000. The company intends to use this equipment in the future. Prepare the journal entry (if any) to record the impairment at December 31, 2020.The management of Petro Garcia Inc. was discussing whether certain equipment should be written off as a charge to current operations because of obsolescence. This equipment has a cost of $900,000 with depreciation to date of $400,000 as of December 31, 2020. On December 31, 2020, management projected its future net cash flows from this equipment to be $300,000 and its fair value to be $230,000. The company intends to use this equipment in the future. Instructions a. Prepare the journal entry (if any) to record the impairment at December 31, 2020. b. Where should the gain or loss (if any) on the write-down be reported in the income statement? c. At December 31, 2021, the equipment’s fair value increased to $260,000. Prepare the journal entry (if any) to record this increase in fair value. d. What accounting issues did management face in accounting for this impairment?
- On January 1, 2022, the Vallahara Company purchased machinery for P 650,000 which it installed in a rented factory. It is depreciating the machinery over 12 years by the straight-line method to a residual value of P 50,000. Late in 2026, because of increasing competition in the industry, the company believes that its asset may be impaired and will have a remaining useful life of five years, over which it estimates the asset will produce total cash inflows of P 1,000,000 and will incur total cash outflows of P 825,000. The cash flows are independent of the company's other activities and will occur evenly each year. The company is not able to determine the fair value based on a current selling price of the machinery. The company's discount rate is 10%. Required 1. Prepare schedules to determine whether, at the end of 2026, the machinery is impaired and, if so, the impairment loss to be recognized. 2. If the machinery is impaired, prepare the journal entry to record the impairment.…On January 1, 2022, the Vallahara Company purchased machinery for P 650,000 which it installed in a rented factory. It is depreciating the machinery over 12 years by the straight-line method to a residual value of P 50,000. Late in 2026, because of increasing competition in the industry, the company believes that its asset may be impaired and will have a remaining useful life of five years, over which it estimates the asset will produce total cash inflows of P 1,000,000 and will incur total cash outflows of P 825,000. The cash flows are independent of the company’s other activities and will occur evenly each year. The company is not able to determine the fair value based on a current selling price of the machinery. The company’s discount rate is 10%. Required 1. Prepare schedules to determine whether, at the end of 2022, the machinery is impaired and, if so, the impairment loss to be recognized. 2. If the machinery is impaired, prepare the journal entry…On January 1, 2015, Vallahara Company purchased machinery for $650,000, which it installed in a rented factory. It is depreciating the machinery over 12 years by the straight-line method to a residual value of $50,000. Late in 2019, because of increasing competition in the industry, the company believes that its asset may be impaired and will have a remaining useful life of 5 years, over which it estimates the asset will produce total cash inflows of $1,000,000 and will incur total cash outflows of $825,000. The cash flows are independent of the company’s other activities and will occur evenly each year. Vallahara is not able to determine the fair value based on a current selling price of the machinery. Vallahara’s discount rate is 10%. Required: 1. Prepare schedules to determine whether, at the end of 2019, the machinery is impaired and, if so, the impairment loss to be recognized. 2. If the machinery is impaired, prepare the journal entry to record the impairment. 3. If…
- A company owns a patent for which it paid $75 million. At the end of 2024, it had accumulated amortization on the patent of $15 million. Due to adverse economic conditions, the company's management determined that it should assess whether an impairment loss should be recognized for the patent. The estimated undiscounted future cash flows to be provided by the patent total $40 million, and the patent's fair value at that point is $30 million. Under these circumstances, the company would reporOn July 1, 2020, Zelensky Company, a calendar-year company, purchased a machine for a cash price of P800,000, with an estimated useful life of 10 years and estimated residual value of P70,000. The company uses double declining balance method. It is the company’s policy to depreciate its assets to the nearest month.During 2022, P131,500 was spent on an upgrade to the machine in order to improve its efficiency and increase the inflow of economic benefits over the machine’s remaining life. In addition, management decided to change to the straight-line method of depreciation, maintaining its residual value of P70,000. What is the revised depreciation expense for the year ended December 31, 2022?On January 1, 2020, due to the unexpected advances in technology, Claro Co. realized that its machinery has been impaired. The unit was purchased on January 1, 2016 for P20,000,000. The entity initially estimated that the asset has a useful life of 20 years with no residual value. On that date, the fair value of the asset was P10,000,000. The cash inflows and outflows to be derived from the asset from its continuing use are as follows: End of year Cash inflow Cash outflow 2020 7,500,000 3,500,000 2021 6,000,000 3,000,000 2022 4,000,000 2,000,000 2023 3,000,000 1,500,000 2024 2,500,000 1,000,000 Should the entity decide to continue to use the asset, remaining life will be 5 years. The discount rate used by the entity is 10%. How much is the impairment loss to be recognized on January 1, 2020?
