Principles of Financial Accounting.
24th Edition
ISBN: 9781260158601
Author: Wild
Publisher: MCG
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Chapter 10, Problem 8QS
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Wilson Corporation is performing the test of impairment of its Technology reporting unit at the end of the year. Wilson has determined the fair value of the unit using a multiple of earnings approach at $2,000,000. The carrying value of the net assets of the Technology unit is $2,100,000. What should Wilson do with this information?
a) Record an impairment loss of $100,000.
b) Record no impairment loss.
c) Perform step 2 of the test of impairment.
d) Value goodwill individually.
On January 1, 2021, an impairment test was conducted by Jess Co. on its Radio Equipment which has an original cost of P1,000,000.00 and an accumulated depreciation in the amount of P300,000.00. Following this, it discovered that said Equipment had a fair value less cost to sell in the amount of P150,000.00 and a value in use in the amount of P300,000.00. Determine the Impairment Loss to be recognized on January 1, 2021.
On January 2, 2020, Quezon Inc. purchased equipment with a cost of P10,500,000, a useful life of 12 years and no salvage value. The Company uses sum-of-the-years-digit method of depreciation. At December 31, 2020 and December 31, 2021, the company determines that impairment indicators are present. The following information is available for impairment testing at each year end:
12/31/20
Fair value less cost to sell P8,515,000
Value-in-use P8,551,000
12/31/21
Fair value less cost to sell P7,530,000
Value-in-use P7,315,000
There is no change in the asset’s useful life or salvage value. The 2021 income statement will report gain on recovery of?
Chapter 10 Solutions
Principles of Financial Accounting.
Ch. 10 - A company paid 326,000 for property that included...Ch. 10 - Prob. 2MCQCh. 10 - Prob. 3MCQCh. 10 - Prob. 4MCQCh. 10 - Prob. 5MCQCh. 10 - Prob. 1DQCh. 10 - Prob. 2DQCh. 10 - Prob. 3DQCh. 10 - Prob. 4DQCh. 10 - Prob. 5DQ
Ch. 10 - Why is the Modified Accelerated Cost Recovery...Ch. 10 - Prob. 7DQCh. 10 - Identify events that might lead to disposal of a...Ch. 10 - Prob. 9DQCh. 10 - Is the declining-balance method an acceptable way...Ch. 10 - Prob. 11DQCh. 10 - Prob. 12DQCh. 10 - Prob. 13DQCh. 10 - Prob. 14DQCh. 10 - Prob. 15DQCh. 10 - APPLE On its recent balance sheet in Appendix A,...Ch. 10 - Prob. 17DQCh. 10 - Prob. 18DQCh. 10 - Prob. 19DQCh. 10 - Prob. 20DQCh. 10 - Prob. 1QSCh. 10 - Prob. 2QSCh. 10 - Prob. 3QSCh. 10 - Prob. 4QSCh. 10 - Prob. 5QSCh. 10 - Prob. 6QSCh. 10 - On January 1, the Matthews Band pays 65,800 for...Ch. 10 - Prob. 8QSCh. 10 - Revenue and capital expenditures 1. Classify the...Ch. 10 - Disposal of assets Garcia Co. owns equipment that...Ch. 10 - Prob. 11QSCh. 10 - Prob. 12QSCh. 10 - Prob. 13QSCh. 10 - Prob. 14QSCh. 10 - Prob. 15QSCh. 10 - Caleb Co. owns a machine that had cost 42,400 with...Ch. 10 - Prob. 1ECh. 10 - Prob. 2ECh. 10 - Prob. 3ECh. 10 - Prob. 4ECh. 10 - Prob. 5ECh. 10 - Prob. 6ECh. 10 - NewTech purchases computer equipment for 154,000...Ch. 10 - Double-declining-balance depreciation In early...Ch. 10 - Straight-line depreciation and income effects P1...Ch. 10 - Double-declining-balance depreciation P1 Tory...Ch. 10 - Prob. 11ECh. 10 - Prob. 12ECh. 10 - Revising depreciation C2 Apex Fitness Club uses...Ch. 10 - Prob. 14ECh. 10 - Prob. 15ECh. 10 - Prob. 16ECh. 10 - Prob. 17ECh. 10 - Montana Mining Co. pays 3,721,000 for an ore...Ch. 10 - Milano Gallery purchases the copyright on a...Ch. 10 - Prob. 20ECh. 10 - Prob. 21ECh. 10 - Lok Co. reports net sales of 5,856,480 for Year 2...Ch. 10 - Prob. 23ECh. 10 - Prob. 24ECh. 10 - Prob. 1APCh. 10 - Prob. 2APCh. 10 - Prob. 3APCh. 10 - Prob. 4APCh. 10 - Yoshi Company completed the following transactions...Ch. 10 - Onslow Co. purchased a used machine for 178,000...Ch. 10 - On July 23 of the current year, Dakota Mining Co....Ch. 10 - On January 1, Falk Company signed a contract to...Ch. 10 - Nagy Company makes a lump-sum purchase of several...Ch. 10 - Prob. 2BPCh. 10 - Prob. 3BPCh. 10 - Prob. 4BPCh. 10 - Prob. 5BPCh. 10 - On January 1, Walker purchased a used machine for...Ch. 10 - Prob. 7BPCh. 10 - Prob. 8BPCh. 10 - Prob. 10SPCh. 10 - Prob. 1AACh. 10 - Prob. 2AACh. 10 - Prob. 3AACh. 10 - Prob. 1BTNCh. 10 - Prob. 5BTN
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- Martinez Company owns equipment that cost $1,053,000 and has accumulated depreciation of $444,600. The expected future net cash flows from the use of the asset are expected to be $585,000. The fair value of the equipment is $468,000.Prepare the journal entry, if any, to record the impairment loss. (If no entry is required, select "No entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.) Account Titles and Explanation Debit Creditarrow_forwardOn December 31, 2019, an equipment with a carrying amount of P6,500,000 (cost of P10,000,000 less accumulated depreciation of P3,500,000) was tested for impairment. An impairment loss of P1,250,000 was recognized and the basis is the recoverable amount which is the estimated fair value less costs to sell on this date. The equipment had a remaining useful life of 8 years and estimated residual value of P50,000. On December 31, 2022, there are indications that the impairment loss recognized in 2019 may be reversed. The value in use is based on estimated net cash flows of P1,000,000 every year (discount rate is 7%) while the asset is in use while the fair value was at P4,200,000 and costs to sell is estimated at P90,000. Which of the following statements is (are) correct? Statement 1: The asset is reported in the statement of financial position as of December 31, 2022 at P4,110,000. Statement 2: The income statement for the year ended December 31, 2022 shall report a gain on recovery…arrow_forwardOn January 1, 2021, Bug Company purchased equipment with a cost of P10,440,000, a useful life of 10 years and no salvage value. The Company uses straight-line depreciation. At December 31, 2021 and December 31, 2022, the company determines that impairment indicators are present. The following information is available for impairment testing at each year end: 12/31/2021 12/31/2022 Fair value less cost to sell P9,115,000 P8,850,000 Value-in-use P9,155,000 P8,815,000 There is a change in the asset’s useful life at the end of 2021 to 15 years from the date of acquisition. Which of the…arrow_forward
- On January 1, 2021, Bug Company purchased equipment with a cost of P10,440,000, a useful life of 10 years and no salvage value. The Company uses straight-line depreciation. At December 31, 2021 and December 31, 2022, the company determines that impairment indicators are present. The following information is available for impairment testing at each year end: 12/31/2021 12/31/2022 Fair value less cost to sell P9,115,000 P8,850,000 Value-in-use P9,155,000 P8,815,000 There is a change in the asset's useful life at the end of 2021 to 15 years from the date of acquisition. Which of the following statements is (are) correct if Bug Company uses revaluation model to account for this asset? Statement 1: The balance of revaluation surplus at the end of 2022 is P348.929. Statement 2: A gain on recovery of P223,786 is reported in Bug's income statement for year ended December 31, 2022. Statement 3: The asset is reported as of December 31, 2022 at P8,724,857. a. Only statement 1 is…arrow_forwardAt 30 June 2019, there was an indication that Modern Machineries Ltd's machinery might be impaired. In preparing for the impairment testing, the accountants have estimated, as at 30 June 2019, the piece of machinery's fair value less costs of disposal to be $495,000 and its value in use to be $580,000. The machinery was purchased and installed on 1 October 2016 by $925,000, The machinery had an accumulated depreciation of $300,000 as on 30 June 2019. Modern Machineries Ltd uses the straight-line method of depreciation for this machinery. Required: Compute the impairment loss to be recorded at 30 June 2019? Journalize the required entries to record the impairment loss to be recorded at 30 June 2019?arrow_forwardSplish Brothers Inc. owns equipment that cost $627,000 and has accumulated depreciation of $162,000. The expected future net cash flows from the use of the asset are expected to be $414,000. The fair value of the equipment is $358,000.Prepare the journal entry, if any, to record the impairment loss. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.) Account Titles and Explanation Debit Credit enter an account title enter a debit amount enter a credit amount enter an account title enter a debit amount enter a credit amountarrow_forward
- MABC Company reported an impairment loss of P2,000,000 in 2020. This loss was related to an item of property, plant and equipment which was acquired on January 1, 2019 with cost of P10,000,000, useful life of 10 years and no residual value. On December 31, 2021, the entity determined that the fair value of the impaired asset had increased to P6,850,000. The straight line method is used in recording depreciation and uses cost model to account its property, plant and equipment. What amount of gain on reversal of impairment should be reported in the income statement for 2021?arrow_forwardWindsor Company owns equipment that cost $972,000 and has accumulated depreciation of $410,400. The expected future net cash flows from the use of the asset are expected to be $540,000. The fair value of the equipment is $432,000.Prepare the journal entry, if any, to record the impairment loss. (If no entry is required, select "No entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.) Account Titles and Explanation Debit Credit enter an account title enter a debit amount enter a credit amount enter an account title enter a debit amount enter a credit amountarrow_forwardThe equipment has carrying amount of 140,000 and recoverable amount of $110,000 as at year end date. What is the impairment loss?arrow_forward
- Shellfish Company determined that, due to the obsolescence, equipment with an original cost of P180,000 and accumulated depreciation at January 1, 2020 of P84,000 had suffered permanent impairment, and as a result should have fair value of only P60,000 as of the beginning of the year. Additionally, the remaining useful life of the equipment was reduced from eight years to three years. If the company’s policy is to credit accumulated depreciation when a PPE is impaired, how much should selfless report as accumulated depreciation in its December 31, 2020 statement of financial position?arrow_forwardOn January 1, 2020, Elite Company purchased equipment with a cost of P11,000,000, useful life of 10 years and no residual value. The entity used straight line depreciation. At every year-end, the entity determined that impairment indicators are present. There is no change in the useful life or residual value. The following information is available for impairment testing: December 31, 2020: Fair Value less Cost of Disposal - P8,100,000 Value in Use - P8,550,000 December 31, 2021 Fair Value less Cost of Disposal - P8,400,000 Value in Use - P8,200,000 1. What is the impairment loss for 2020? 2. What is the gain on reversal of impairment for 2021? 3. What is the depreciation for 2022?arrow_forwardOn February 14, 2022, Frozen Company classified a non-current asset as held for sale. At that time, the asset's carrying amount was P64,000. It's fair value was estimated at P48,000 and the cost to sell at P3,800. On May 9, 2022, the asset was sold for P42,000 and paid transaction costs of P2,000. The company accounts for non-current assets using the cost model. 9. How much impairment loss is to be recorded by Frozen relating to the non-current assets held for sale? 10. At what amount should the non-current assets held for sale be recorded on Feb. 14, 2022? 11. How much gain(loss) is to be reported by Frozen on the disposal of the non-current assets held for sale?arrow_forward
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Asset impairment explained; Author: The Finance Storyteller;https://www.youtube.com/watch?v=lWMDdtHF4ZU;License: Standard Youtube License