Concept explainers
IFRS; revaluation of machinery;
• LO11–10
IFRS
Dower Corporation prepares its financial statements according to IFRS. On March 31, 2018, the company purchased equipment for $240,000. The equipment is expected to have a six-year useful life with no residual value. Dower uses the
Required:
1. Calculate depreciation for 2018.
2. Prepare the
3. Calculate depreciation for 2019.
4. Repeat requirement 2 assuming that the fair value of the equipment at the end of 2018 is $195,000.
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INTERMEDIATE ACCOUNTING RMU 9TH EDITION
- Change in Estimate Assume that Bloomer Company purchased a new machine on January 1, 2016, for $80,000. The machine has an estimated useful life of nine years and a residual value of $8,000. Bloomer has chosen to use the straight-line method of depreciation. On January 1, 2018, Bloomer discovered that the machine would not be useful beyond December 31, 2021, and estimated its value at that time to be $2,000. Required Calculate the depreciation expense, accumulated depreciation, and book value of the asset for each year 2016 to 2021. Was the depreciation recorded wrong in 2016 and 2017? If so, why was it not corrected?arrow_forward15 Faithful Company purchased an equipment on January 2, 2021 for P3,000,000. The equipment had an estimated useful life of 5 years. It is the company’s policy to use the double declining method in its first two years and then switch to the straight-line method for the remaining useful life of the asset. How much is the balance of the accumulated depreciation account pertaining to the equipment as of December 31, 2023?arrow_forwardExercise 11-24 (Algo) Change in principle; change in depreciation methods [LO11-2, 11-6] Alteran Corporation purchased office equipment for $2.2 million at the beginning of 2022. The equipment is being depreciated over a 10-year life using the double-declining-balance method. The residual value is expected to be $700,000. At the beginning of 2024 (two years later), Alteran decided to change to the straight-line depreciation method for this equipment. Required: Prepare the journal entry to record depreciation for the year ended December 31, 2024. Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Do not round intermediate calculations. Enter your answers in whole dollars. View transaction list View journal entry worksheet Event 1 No 1 General Journal Depreciation expense Accumulated depreciation Debit Credit Tecnalarrow_forward
- wh.ca/d21/le/content/126096/viewContent/7921257/View mitaltar CETIL Situation 4: On March 31, 2017, Wayside Corporation purchased a new piece of manufacturing equipment for $1,615,000. At that time, the estimated useful life of the equipment was five years, with a residual value of $325,000. On August 1, 2020, due to increased competition causing a decreased selling price for its product, Wayside decided to discontinue the product. By December 31, 2020, there was a formal plan in place to sell the equipment, and the equipment qualified for classification as held for sale. At December 31, 2020, the equipment's fair value less costs to sell was $260,000. Due to matters beyond Wayside's control, a potential sale of the equipment fell through in 2021, although consumer confidence in Wayside's product increased significantly because of reported defects in its competitors' products. The equipment remained classified as held for sale at December 31, 2021, when the equipment's fair value less…arrow_forwardExercise 11-3 (Aigo) Depreciation methods; partial periods [LUT1-2] The following information applies to the questions displayed below.] On October 1, 2024, the Allegheny Corporation purchased equipment for $233,000. The estimated service life of the equipment is 10 years and the estimated residual value is $2,000. The equipment is expected to produce 420,000 units during its life. Required: Calculate depreciation for 2024 and 2025 using each of the following methods. Partial-year depreciation is calculated based on the number of months the asset is in service. Exercise 11-3 (Algo) Part 2 2. Double-declining-balance. Depreciation Expense = $ 11,650 Formula Beginning Book Value Double-Declining-Balance Method xDouble the Straight-line Rate X Fraction of Year = Amount for 2024 $ 233,000 x 20 % x 3/12 Amount for 2025 X 20 % * 12/12 =arrow_forwardRequired information Exercise 11-3 (Algo) Depreciation methods partial periods (LO 11-2] [The following information applies to the questions displayed below.] On October 1, 2021, the Allegheny Corporation purchased equipment for $148,000. The estimated service life of the equipment is 10 years and the estimated residual value is $5,000. The equipment is expected to produce 260.000 units during its life. Required: Calculate depreciation for 2021 and 2022 using each of the following methods. Partial-year depreciation is calculated based on the number of months the asset is in servicearrow_forward
- Problem 11-11 (Algo) Error correction; change in depreciation method [LO11-2, 11-6, 11-7] Collins Corporation purchased office equipment at the beginning of 2022 and capitalized a cost of $2,130,000. This cost figure included the following expenditures: Purchase price Freight charges Installation charges Annual maintenance charge Total The company estimated an eight-year useful life for the equipment. No residual value is anticipated. The double-declining-balance method was used to determine depreciation expense for 2022 and 2023. In 2024, after the 2023 financial statements were issued, the company decided to switch to the straight-line depreciation method for this equipment. At that time, the company's controller discovered that the original cost of the equipment incorrectly included one year of annual maintenance charges for the equipment. Required: 1. Ignoring income taxes, prepare the appropriate correcting entry for the equipment capitalization error discovered in 2024. 2.…arrow_forwardExercises Required information Exercise 11-4 (Algo) Other depreciation methods [LO11-2] [The following information applies to the questions displayed below.] On January 1, 2021, the Allegheny Corporation purchased equipment for $343,000. The estimated service life of the equipment is 10 years and the estimated residual value is $24,000. The equipment is expected to produce 296,000 units during its life. Required: Calculate depreciation for 2021 and 2022 using each of the following methods. Exercise 11-4 (Algo) Part 3 3. Assume instead the equipment was purchased on October 1, 2021. Calculate depreciation for 2021 and 2022 using each of the two methods. Partial-year depreciation is calculated based on the number of months the asset is in service. (Do not round intermediate answers and round your answers to the nearest whole dollar amount.) Sum-of-the-years' digits One hundred fifty percent declining balance $ 2021 12,863 2022arrow_forward5 points What amount should be recorded as depreciation for 2021? * On January 1, 2019, Brazilia Company purchased for P4,800,000 a machine with a useful life of ten years and residual value of P200,000. The machine was depreciated by the double declining balance method and the carrying amount of the machine was P3,072,000 on December 31, 2020. The entity changed to the straight line method on January 1, 2021. The residual value did not change. 287200 384000 460000 359000arrow_forward
- Required information Exercise 11-3 (Algo) Depreciation methods partial periods [LO11-2] [The following information applies to the questions displayed below.] On October 1, 2021, the Allegheny Corporation purchased equipment for $148,000. The estimated service life of the equipment is 10 years and the estimated residual value is $5,000. The equipment is expected to produce 260,000 units during its life. Required: Calculate depreciation for 2021 and 2022 using each of the following methods. Partial-year depreciation is calculated based on the number of months the asset is in service. Exercise 11-3 (Algo) Part 2 2. Double-declining-balance. Formula Amount for 2021 Amount for 2022 Choose Numerator: Beginning Book Value Answer is not complete. Double-Declining-Balance Method X Choose Denominator: X Double the Straight-line Rate % % X X X x Fraction of Year Fraction of Year 3/12 12/12 › › Depreciation Expense Depreciation Expensearrow_forwardRequired information Exercise 11-3 (Algo) Depreciation methods partial periods [LO11-2] [The following information applies to the questions displayed below.] On October 1, 2021, the Allegheny Corporation purchased equipment for $233,000. The estimated service life of the equipment is 10 years and the estimated residual value is $2,000. The equipment is expected to produce 420,000 units during its life. Required: Calculate depreciation for 2021 and 2022 using each of the following methods. Partial-year depreciation is calculated based on the number of months the asset is in service. Exercise 11-3 (Algo) Part 2 2. Double-declining-balance. X Answer is not complete. Double-Declining-Balance Method Fraction of Depreciation Expense Depreciation Expense Choose Numerator: Choose Denominator: !! Year Fraction of Year Formula Cost Minus Residual Straight-line Rate Amount for 2021 Amount for 2022 2$ 2 X x 3/12 11,650 %3D $ 2 X 10 X % 44,270 %3Darrow_forwardExercise 9.3 (Algo) Depreciation for Partial Years (LO9-3) On August 3, Cinco Construction purchased special-purpose equipment at a cost of $7,600,000. The useful life of the equipment was estimated to be eight years, with an estimated residual value of $20,000. a. Compute the depreciation expense to be recognized each calendar year for financial reporting purposes under the straight-line depreciation method (half-year convention). b. Compute the depreciation expense to be recognized each calendar year for financial reporting purposes under the 200 percent declining-balance method (half-year convention) with a switch to straight-line when it will maximize depreciation expense. c. Which of these two depreciation methods (straight-line or double-declinin.arrow_forward
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