There is no change in the asset's useful life or salvage value. The 2021 income statement will report gain on recovery of?
Q: As generally used in accounting, what is depreciation? a. It is an accounting process which…
A: Introduction: Depreciation: Decreasing value of fixed assets over its useful life period called as…
Q: The following information has been provided about an asset: Accumulated depreciation (as at June…
A: In this question first we need to calculate the book value of the asset.If the book value is less…
Q: Statement 1: In impairment loss, the discount rate being used is the current pretax rate that…
A: Ans. While computing impairment loss it is necessary that the cash flows are adjusted and multiplied…
Q: 1. What amount of depreciation should be reported in the historical cost income statement for 2021?…
A: 1. Depreciation Expense based on Historical Cost = P5,000,000/5years = P1,000,000 2.…
Q: Last year, Wyeth Company recorded an impairment on an asset held for use. Recent appraisals indicate…
A:
Q: A company fails to capitalize avoidable interest incurred while constructing an asset. What is the…
A: The interest expense incurred for construction of an asset should be capitalized because a new fixed…
Q: Which combination of depreciation methods and useful lives is most conservative in the year a…
A: According to the conservative approach, the depreciation expense will be reported higher and profit…
Q: Which of the following is not a requirement for an asset to be depreciable?a. It must have a life…
A: Depreciation: A gradual reduction in the value of any asset or a normal wear and tear of the asset…
Q: Which of the following statements is false? A For tax purposes, companies can use the MACRS…
A: MACRS means The Modified Accelerated Cost Recovery System
Q: Based on the above and the result of your audit, answer the following: (Disregard tax implications)…
A: 3. Depreciation expense of Asset P for the year 2020 = P14500 Depreciation expense of Asset R for…
Q: Which of the following would have an effect on the presentation of past years' comparable financial…
A: Financial Statement- Financial statements contain information about an entity's financial activity…
Q: Over the life of a depreciable asset, its recorded cost decreases, the related accumulated…
A: Asset is recorded in the books of account at cost which is depreciated over the useful life of an…
Q: Which of the following statements related to long-lived assets is true? Depreciation is…
A: Depreciation : Depreciation is an accounting method of allocating the cost of a tangible or…
Q: Initial operating loss related to Property, Plant and Equipment should be A. Capitalized as part of…
A: Answer:- Operating loss:- If a company's operational expenditures surpass its gross earnings, the…
Q: When an impairment loss occurs, the carrying amount of the asset should be reduced to its a) ©…
A: Impairment: It implies to an increase in the fixed asset's carrying value in relation to the price…
Q: True or false SL depreciation assumes that an equal share of the total depreciation is not taken…
A: The depreciation expense is charged on fixed assets as reduced value of the fixed asset with usage…
Q: Which of the following statements is true with respect to intangible assets with indefinite lives? O…
A: As per IAS 36 Intangible assets, For Intangible assets with indefinite useful, Intangible assets not…
Q: What amount should be recorded as depreciation for 2021? a. 287200 b. 384000 c. 460000
A: Depreciation represents the reduction in the value of an asset over a useful life of the asset. It…
Q: The value of "Property, Plant, & Equipment, net" reported on the balance sheet represents: A) The…
A: Fixed assets are an unavoidable component of every business organization. These assets are useful in…
Q: The period of time during which interest must be capitalized ends when The asset is abandoned, sold…
A: As per IFRS on Borrowing Costs, the capitalization of interest ceases when the activities necessary…
Q: or loss on disposal of the fixed asset? Select the correct answer. A. $2,251.69 loss
A: Correct answer is a . Explain Calculate the book value of the asset: Book value of the asset…
Q: a) What is the cost and the carrying value for the assets discussed above as at 30 June 2019? b)…
A: Since there is more than 3 subparts, SME is going to answer only (a)(b)(c)
Q: The gain on impairment loss reversal of an asset which is recognized in profit or loss is computed…
A: The loss of impairment is recognized in the income account and the reversal of the impairment loss…
Q: The sale of a depreciable asset resulting in a gain indicates that the proceeds from the sale were…
A: Depreciable assets are those fixed assets on which depreciation is charged over the years and net…
Q: Which combination of depreciation methods and useful lives is most conservative in the year a…
A: As compare to other combination methods of depreciation, Declining balance depreciation with a long…
Q: A deduction for percentage depletion is allowed even though the entire cost of the asset has been…
A: Depletion: It refers to the process of proportionately distributing the cost of the extracting…
Q: Which of the following transactions and events would result in a deterioration in Net Tangible Asset…
A: Tangible assets are which can be touch felt and can be seen, Whereas intangible assets we cannot…
Q: fhich of the tfollowing statement best describes depreciation? a. It is a means of spreading the…
A: Fixed assets: These are the assets which were used in the business for more than one year. These…
Q: Which of the following characteristics is not common to both tangible and intangible assets? a.…
A: Tangible assets refers to the assets which have physical form while intangible assets lack physical…
Q: A major addition to equipment should have been capitalized in the year 2021 but was incorrectly…
A: *** IF THE ADDITIONS MADE TO ASSET WHICH BRINGS THE PROBABLE ENHANCED FUTURE CASH INFLOWS FROM THE…
Q: (a) When would the disposal of a long-term asset result in no gain or loss? (b) When would the…
A: Long-term assets can be defined as those assets which are held by an investor for a period of more…
Q: The depreciation increases the book value of equipment shown in the balance of its accumulated…
A: In accounting terms, depreciation is defined as the reduction of recorded value of a fixed asset in…
Q: How much is the additional loss, related to the return of the asset to its original classification…
A: Held for Sales How to account for non-current assets held for sale is described in IFRS 5…
Q: depreciable, the absence of depreciation
A: Depreciation refers to the decrease in the value of an intangible asset over a period of time. There…
Q: In Able Company’s efforts to estimate a value for Baker Company's goodwill, Able is estimating Baker…
A: Goodwill means the reputation of the company due to any factor like location , product , price ,…
Q: Consider the following statements: I. If the financial asset is reclassified from amortized cost to…
A: IFRS 9 deals with the classification and reclassification of financial assets and liabilities. When…
Q: Which of the following statements about capitalizing costs is correct?A. Capitalizing costs refers…
A: There are two type of costs treatments that are being done on all type of costs being incurred. One…
Q: Under the historical accounting system, depreciation is calculated on the original cost of fixed…
A: The question is multiple choice question. Required Choose the Correct Option.
Q: In 2019, A.M.E. Corporation's accountant incorrectly expensed the cost of a major repairs to one of…
A: When ever any major repair is done on any fixed assets which would increase the capacity of that…
Q: need to know how to calculate the gain on the equipment sold in part C The balance sheets of HiROE…
A: The depreciation expense is charged on fixed assets as reduced value of the fixed asset with usage…
Q: According to PFRS 9, impairment gain
A: As per PFRS9 impairment losses and impairment gains (in the case of purchased or originated…
Q: The balance sheets of HIROE Inc. showed the following at December 31, 2020 and 2019: December 31,…
A:
Q: depreciation expense for past periods must be recalculated. depreciation expense for future years…
A: The right answer is option c. depreciation expense for the current and future years is changed.
Q: In determining the value in use, which of the following cash flow is excluded from the computation?…
A: As per provisions of IFRS, the value in use is used for the purpose of impairment of asset. If the…
Q: When an item of property, plant and equipment is derecognised, the treatment of any revaluation…
A: When a asset is revalued and if there is any revaluation gain then such revaluation gain should be…
Q: What is an impairment loss? A ) The amount by which the carrying amount of an asset exceeds the…
A: An impairment loss is a recognized decrease in the par value of an asset caused by a deterioration…
Q: Which of the following methods is used to amortize intangible assets over their useful lives? a. a…
A: Intangible assets have no physical substance but have a useful life and value. so intangible assets…
Step by step
Solved in 2 steps with 1 images
- On May 10, 2019, Horan Company purchased equipment for 25,000. The equipment has an estimated service life of 5 years and zero residual value. Assume that the straight-line depreciation method is used. Required: Compute the depreciation expense for 2019 for each of the following four alternatives: 1. Horan computes depreciation expense to the nearest day. (Use 12 months of 30 days each and round the daily depreciation rate to 2 decimal places.) 2. Horan computes depreciation expense to the nearest month. Assets purchased in the first half of the month are considered owned for the whole month. 3. Horan computes depreciation expense to the nearest whole year. Assets purchased in the first half of the year are considered owned for the whole year. 4. Horan records one-half years depreciation expense on all assets purchased during the year.On July 1, 2018, Mundo Corporation purchased factory equipment for 50,000. Residual value was estimated at 2,000. The equipment will be depreciated over 10 years using the double-declining balance method. Counting the year of acquisition as one-half year, Mundo should record 2019 depredation expense of: a. 7,680 b. 9,000 c. 9,600 d. 10,000During 2019, White Company determined that machinery previously depreciated over a 7-year life had a total estimated useful life of only 5 years. An accounting change was made in 2019 to reflect the change in estimate. If the change had been made in 2018, accumulated depreciation at December 31, 2018, would have been 1,600,000 instead of 1,200,000. As a result of this change, the 2019 depreciation expense was 100,000 greater than it would have been if no change were made. Ignoring income tax considerations, what is the proper amount of the adjustment to Whites January 1, 2019, balance of retained earnings? a. 0 b. 100,000 c. 280,000 d. 400,000
- Kam Company purchased a machine on January 2, 2019, for 20,000. The machine had an expected life of 8 years and a residual value of 300. The double-declining-balance method of depreciation is used. Required: 1. Compute the depreciation expense for each year of the assets life and book value at the end of each year. 2. Assuming that the company has a policy of always changing to the straight-line method at the midpoint of the assets life, compute the depreciation expense for each year of the assets life. 3. Assuming that the company always changes to the straight-line method at the beginning of the year when the annual straight-line amount exceeds the double-declining-balance amount, compute the depreciation expense for each year of the assets life.On January 1, 2014, Klinefelter Company purchased a building for 520,000. The building had an estimated life of 20 years and an estimated residual value of 20,000. The company has been depreciating the building using straight-line depreciation. At the beginning of 2020, the following independent situations occur: a. The company estimates that the building has a remaining life of 10 years (for a total of 16 years). b. The company changes to the sum-of-the-years-digits method. c. The company discovers that it had ignored the estimated residual value in the computation of the annual depreciation each year. Required: For each of the independent situations, prepare all journal entries related to the building for 2020. Ignore income taxes.At the end of 2020, while auditing Sandlin Companys books, before the books have been closed, you find the following items: a. A building with a 30-year life (no residual value, depreciated using the straight-line method) was purchased on January 1, 2020, by issuing a 90,000 non-interest-bearing, 4-year note. The entry made to record the purchase was a debit to Building and a credit to Notes Payable for 90,000; 12% is a fair rate of interest on the note. b. The inventory at the end of 2020 was found to be overstated by 15,000. At the same time, it was discovered that the inventory at the end of 2019 had been overstated by 35,000. The company uses the perpetual inventory system. c. For the last 3 years, the company has failed to accrue salaries and w-ages. The correct amounts at the end of each year were: 2018, 12,000; 2019, 18,000; and 2020, 10,000. Required: 1. Prepare journal entries to correct the errors. Ignore income taxes. 2. Assume, instead, that the company discovered the errors after it had closed the books. Prepare journal entries to correct the errors. Ignore income taxes.
- The following are independent errors: a. In January 2019, repair costs of 9,000 were debited to the Machinery account. At the beginning of 2019, the book value of the machinery was 100,000. No residual value is expected, the remaining estimated life is 10 years, and straight-line depreciation is used. b. All purchases of materials for construction contracts still in progress have been immediately expensed. It is discovered that the use of these materials was 10,000 during 2018 and 12,000 during 2019. c. Depreciation on manufacturing equipment has been excluded from manufacturing costs and treated as a period expense. During 2019, 40,000 of depreciation was accounted for in that manner. Production was 15,000 units during 2019, of which 3,000 remained in inventory at the end of the year. Assume there was no inventory at the beginning of 2019. Required: Prepare journal entries for the preceding errors discovered during 2020. Ignore income taxes.At the beginning of 2020, Holden Companys controller asked you to prepare correcting entries for the following three situations: 1. Machine X was purchased for 100,000 on January 1, 2015. Straight-line depreciation has been recorded for 5 years, and the Accumulated Depreciation account has a balance of 45,000. The estimated residual value remains at 10,000, but the service life is now estimated to be 1 year longer than originally estimated. 2. Machine Y was purchased for 40,000 on January 1, 2018. It had an estimated residual value of 4,000 and an estimated service life of 8 years. It has been depreciated under the sum-of-the-years-digits method for 2 years. Now, the company has decided to change to the straight-line method. 3. Machine Z was purchased for 80,000 on January 1, 2019. Double-declining-balance depreciation has been recorded for 1 year. The estimated residual value is 8,000 and the estimated service life is 5 years. The computation of the depreciation erroneously included the estimated residual value. Required: Prepare any necessary correcting journal entries for each situation. Also prepare the journal entry for each situation to record the depreciation for 2020. Ignore income taxes.Hathaway Company purchased a copying machine for 8,700 on October 1, 2019. The machines residual value was 500 and its expected service life was 5 years. Hathaway computes depreciation expense to the nearest whole month. Required: 1. Compute depredation expense (rounded to the nearest dollar) for 2019 and 2020 using the: a. straight-line method b. sum-of-the-years-digits method c. double-declining-balance method 2. Next Level Which method produces the highest book value at the end of 2020? 3. Next Level Which method produces the highest charge to income in 2020? 4. Next Level Over the life of the asset, which method produces the greatest amount of depreciation expense?
- 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.During 2019, Ryel Companys controller asked you to prepare correcting journal entries for the following three situations: 1. Machine A was purchased for 50,000 on January 1, 2014. Straight-line depreciation has been recorded for 5 years, and the Accumulated Depreciation account has a balance of 25,000. The estimated residual value remains at 5,000, but the service life is now estimated to be 1 year longer than estimated originally. 2. Machine B was purchased for 40,000 on January 1, 2017. It had an estimated residual value of 5,000 and an estimated service life of 10 years. it has been depreciated under the double-declining-balance method for 2 years. Now, at the beginning of the third year, Ryel has decided to change to the straight-line method. 3. Machine C was purchased for 20,000 on January 1, 2018, Double-declining-balance depreciation has been recorded for 1 year. The estimated residual value of the machine is 2,000 and the estimated service life is 5 years. The computation of the depreciation erroneously included the estimated residual value. Required: Prepare any necessary correcting journal entries for each situation. Also prepare the journal entry necessary for each situation to record depreciation expense for 2019.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.