INTERMEDIATE ACCOUNTING
3rd Edition
ISBN: 9780136946694
Author: GORDON
Publisher: RENT PEARS
expand_more
expand_more
format_list_bulleted
Question
Chapter 12, Problem 12.2P
a.
To determine
To calculate: The amount of net carrying value.
Given information:
Equipment cost is $500,000
Salvage value is $10,000
b.
To determine
To compute: The present value of expected cash flows under estimate 1 and estimate 2.
Given,
Cost of capital is 8%
c.
To determine
To prepare:
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solutionStudents have asked these similar questions
Required information
[The following information applies to the questions displayed below.]
New Morning Bakery is in the process of closing its operations. It sold its two-year-old bakery ovens to Great Harvest
Bakery for $640,000. The ovens originally cost $844,000, had an estimated service life of 10 years, had an estimated
residual value of $54,000, and were depreciated using straight-line depreciation. Complete the requirements below
for New Morning Bakery.
3. What is the gain or loss on the sale of the ovens at the end of the second year?
Required information
[The following information applies to the questions displayed below.]
New Morning Bakery is in the process of closing its operations. It sold its two-year-old bakery ovens to Great Harvest
Bakery for $520,000. The ovens originally cost $712,000, had an estimated service life of 10 years, had an estimated
residual value of $42,000, and were depreciated using straight-line depreciation. Complete the requirements below for
New Morning Bakery.
4. Determine the financial statement effects of the sale of the ovens at the end of the second year.
Note: Amounts to be deducted should be indicated by a minus sign.
Assets
Balance Sheet
Liabilities
Stockholders' Equity
Common Retained
Stock Earnings
Revenues
Income Statement
Expenses
Net Income
Required information
(The following information applies to the questions displayed below.]
New Morning Bakery is in the process of closing its operations. It sold its two-year-old bakery ovens to Great Harvest
Bakery for $660,000. The ovens originally cost $866,000, had an estimated service life of 10 years, had an estimated
residual value of $56,000, and were depreciated using straight-line depreciation. Complete the requirements below for
New Morning Bakery.
4. Record the sale of the ovens at the end of the second year. (If no entry is required for a transaction/event, select "No Journal
Entry Required" in the first account field.)
View transaction list
Journal entry worksheet
1
Record the sale of ovens.
Note: Enter debits before credits.
Transaction
General Journal
Chapter 12 Solutions
INTERMEDIATE ACCOUNTING
Ch. 12 - Prob. 12.1QCh. 12 - Can firms group all property, plant, and equipment...Ch. 12 - Prob. 12.3QCh. 12 - Prob. 12.4QCh. 12 - Do firms follow the same steps for impairment...Ch. 12 - Prob. 12.6QCh. 12 - Prob. 12.7QCh. 12 - Prob. 12.8QCh. 12 - Under IFRS, if a firm recovers an impairment loss...Ch. 12 - Under IFRS, when do firms test plant assets and...
Ch. 12 - Prob. 12.11QCh. 12 - Prob. 12.12QCh. 12 - Prob. 12.1MCCh. 12 - Prob. 12.2MCCh. 12 - Prob. 12.3MCCh. 12 - Prob. 12.4MCCh. 12 - Prob. 12.5MCCh. 12 - Prob. 12.6MCCh. 12 - Prob. 12.1BECh. 12 - Prob. 12.2BECh. 12 - Prob. 12.3BECh. 12 - Prob. 12.4BECh. 12 - Indefinite-Life Intangible Asset Impairment....Ch. 12 - Prob. 12.6BECh. 12 - Prob. 12.7BECh. 12 - Prob. 12.8BECh. 12 - Prob. 12.9BECh. 12 - Prob. 12.10BECh. 12 - Prob. 12.11BECh. 12 - Prob. 12.12BECh. 12 - Prob. 12.13BECh. 12 - Prob. 12.14BECh. 12 - Prob. 12.15BECh. 12 - Prob. 12.16BECh. 12 - Prob. 12.17BECh. 12 - Prob. 12.18BECh. 12 - Prob. 12.19BECh. 12 - Prob. 12.20BECh. 12 - Prob. 12.21BECh. 12 - Prob. 12.22BECh. 12 - Prob. 12.23BECh. 12 - Tangible Asset Impairment. Henne Optical...Ch. 12 - Tangible Asset Impairment Loss. Use the same...Ch. 12 - Prob. 12.3ECh. 12 - Prob. 12.4ECh. 12 - Prob. 12.5ECh. 12 - Tangible Asset Impairment Loss, IFRS. Use the same...Ch. 12 - Prob. 12.7ECh. 12 - Prob. 12.8ECh. 12 - Prob. 12.9ECh. 12 - Assets Held for Disposal. Hattie Corporation...Ch. 12 - Prob. 12.11ECh. 12 - Asset Revaluation, Downwards, IFRS. Lousa Company...Ch. 12 - Tangible Asset Impairment. Chrispian Cookies, Inc....Ch. 12 - Prob. 12.2PCh. 12 - Tangible Asset Impairment. Using the same...Ch. 12 - Prob. 12.4PCh. 12 - Goodwill Impairment, Tangible Fixed Assets, and...Ch. 12 - Tangible Asset Impairment, Potential Reversal,...Ch. 12 - Prob. 12.7PCh. 12 - Prob. 12.8PCh. 12 - Prob. 12.9PCh. 12 - Comprehensive Asset Revaluation Problem (Initial...Ch. 12 - Prob. 12.11PCh. 12 - Judgment Case 1: Impairments of PPE under IFRS...Ch. 12 - Prob. 2JCCh. 12 - Prob. 3JCCh. 12 - Financial Statement Analysis Case 1: Long-Lived...Ch. 12 - Surfing the Standards Case 1: Impairments of PPE...Ch. 12 - Prob. 2SSCCh. 12 - Prob. 1BCCCh. 12 - Basis for Conclusions Case 2: Intangible Assets ...Ch. 12 - Basis for Conclusions Case 3: Goodwill Impairment...
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- Adger Corporation purchased a machine for P150,000 on January 1, 2004. Adger will depreciate the machine using the straight-line method using a five-year period with no residual value. As a result of an error in its purchasing records, Badger did not recognize any depreciation for the machine in its 2004 financial statements. Adger discovered the problem during the preparation of its 2005 financial statements. What amount should Adger record for depreciation expense on this machine for 2005? Choices; P 0 P 30,000 P 37,500 P 60,000arrow_forward! Required information [The following information applies to the questions displayed below.] New Morning Bakery is in the process of closing its operations. It sold its two-year-old bakery ovens to Great Harvest Bakery for $530,000. The ovens originally cost $723,000, had an estimated service life of 10 years, had an estimated residual value of $43,000, and were depreciated using straight-line depreciation. Complete the requirements below for New Morning Bakery. Determine the financial statement effects of the sale of the ovens at the end of the second year. Note: Amounts to be deducted should be indicated by a minus sign.arrow_forwardNew Morning Bakery is in the process of closing its operations. It sold its two-year-old bakery ovens to Great Harvest Bakery for $700,000. The ovens originally cost $910,000, had an estimated service life of 10 years, had an estimated residual value of $60,000, and were depreciated using straight-line depreciation. Complete the requirements below for New Morning Bakery. Required: 1. Calculate the balance in the Accumulated Depreciation account at the end of the second year. 2. Calculate the book value of the ovens at the end of the second year.3. What is the gain or loss on the sale of the ovens at the end of the second year? 4. Record the sale of the ovens at the end of the second year.arrow_forward
- The property, plant and equipment account of Cuddle PH was revisited by its property officers. They discovered that due to obsolescence, machineries with a total historical cost of P2,100,000 and accumulated depreciation of P1,750,000, will no longer provide economic benefits to the company wither from its disposal or use.Which of the following will be included in the journal entries to record the derecognition of these machineries? A. credit Accumulated Depreciation, P1,750,000 B. credit Machineries, P350,000 C. credit Loss from Derecognition, P350,000 D. credit Machineries, P2,100,000arrow_forwardOn January 1,2013, GRACE Company acquired a bakery equipment at a cost of $650,000. The equipment is being depreciated using straight-line method over its estimated useful life of 10 years. On December 31,2016, a determination was made that the asset's recoverable amount was only $240,000. On December 31,2018, the asset's recoverable amount was determined to be $270,000 and the management believes that the impairment previously recognized should be reversed. How much impairment loss should be recognized on December 31,2016?arrow_forwardMandala Company acquired a new milling machine on April 1, 2008. The machine has a special component that required replacement before the end of the useful life. The asset was originally recorded in two accounts, one representing the main unit and the other for the special component. Depreciation is recorded by the straight line method and residual value is disregarded. On April 1, 2014, the special component is scrapped and is replaced with a similar component. This new component is expected to have a residual value of approximately 20% of cost at the end of the useful life of the main unit, and because of materiality, the residual value will be considered in calculating depreciation. Main milling machine: Purchase price in 2008 7,500,000 100,000 10 years Residual Value Estimated useful life First special component Purchase price 1,200,000 Residual Value 60,000 Estimated useful life 6 years Second special component Purchase price 2,000,000 Residual Value (20% x 2,000,000) 400,000 What…arrow_forward
- (Depreciation—Replacement, Change in Estimate) Greg Maddox Company constructed a building at a cost of $2,200,000 and occupied it beginning in January 1998. It was estimated at that time that its life would be 40 years, with no salvage value.In January 2018, a new roof was installed at a cost of $300,000, and it was estimated then that the building would have a useful life of 25 years from that date. The cost of the old roof was $160,000.Instructions(a) What amount of depreciation should have been charged annually from the years 1998 to 2017? (Assume straight-line depreciation.)(b) What entry should be made in 2018 to record the replacement of the roof?(c) Prepare the entry in January 2018 to record the revision in the estimated life of the building, if necessary.(d) What amount of depreciation should be charged for the year 2018?arrow_forwardKenya Company acquired a machine on January 1, 2013 for P8,000,000. The machine has a 10-year useful life, a P500,000 residual value, and is to be depreciated using the straight line method. By the end of 2014, the machine was damaged by a major accident occurring in the plant. The engineers and technicians could not repair this damage and therefore the machine's performance was expected to decline in the future and unlikely to be sold at the end of the useful life. Thus, the machine has a zero residual value. On December 31,2014, a test for recoverability revealed that the expected net future undiscounted cash flows related to the continued use and eventual disposal of the machine totaled P7,000,000. The fair value on December 31, 2014 is P6,600,000 while the discounted net future cash flows amount to P6,300,000. What is the depreciation expense that should be recognized for the year ended December 31, 2014? O P825,000 O P812,500 O Answer not given O P787,500 O P750,000arrow_forwardOn January 1, 2006, LUOGI Company owned a machine having a carrying amount of P240,000. The machine was purchased four years earlier for P400,000. LUOGI uses straight-line depreciation. During December 2006 LUOGI determined that the machine suffered permanent impairment of its operational value and will not be economically useful in its production process after December 31, 2006. On January 5, 2007 LUOGI sold the machine for P70,000 at fair value as December 31, 2006 incurring a disposal cost of P5,000. In its income statement for the year ended December 31, 2006, LUOGI should recognize a loss of 175,000 200,000 0 135,000arrow_forward
- On July 1, 2015 , Smile Corporation purchased a machine at a cost of P300,000. This machine was estimated to have a useful life of 5-years with no salvage value and was depreciated using the straight-line method. On January 2, 2018. Youth determined that this machine could no longer work efficiently, that its value had been permanently impaired, and that P90,000 could be recovered over the remaining useful life of the machine. In its December 31, 2016 statement of financial position, how much should Smile report as carrying value of the machine?arrow_forwardNew Morning Bakery is in the process of closing its operations. It sold its two-year- old bakery ovens to Great Harvest Bakery for $610,000. The ovens originally cost $ 811,000, had an estimated service life of 10 years, had an estimated residual value of $51,000, and were depreciated using straight-line depreciation. Complete the requirements below for New Morning Bakery. 4. Determine the financial statement effects of the sale of the ovens at the end of the second year.arrow_forwardEast Mill Pizzeria is closing its business. It sold its two-year-old pizza ovens to Marco's Italian Restaurant for $600,000. Originally, East Mill acquired the pizza ovens at a cost of $800,000. The ovens had an estimated useful life of 10 years, an estimated residual value of $50,000, and were depreciated using straight-line depreciation. Complete the requirements below for East Mill Pizzeria. 4. Record the sale of the ovens at the end of the second year (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.) View transaction list Journal entry worksheet Record the sale of ovens. Note: Enter debits before credits, Transaction General Journal Debit Credit Record entry Clear entry View general journalarrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- AccountingAccountingISBN:9781337272094Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.Publisher:Cengage Learning,Accounting Information SystemsAccountingISBN:9781337619202Author:Hall, James A.Publisher:Cengage Learning,
- Horngren's Cost Accounting: A Managerial Emphasis...AccountingISBN:9780134475585Author:Srikant M. Datar, Madhav V. RajanPublisher:PEARSONIntermediate AccountingAccountingISBN:9781259722660Author:J. David Spiceland, Mark W. Nelson, Wayne M ThomasPublisher:McGraw-Hill EducationFinancial and Managerial AccountingAccountingISBN:9781259726705Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting PrinciplesPublisher:McGraw-Hill Education
Accounting
Accounting
ISBN:9781337272094
Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:Cengage Learning,
Accounting Information Systems
Accounting
ISBN:9781337619202
Author:Hall, James A.
Publisher:Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis...
Accounting
ISBN:9780134475585
Author:Srikant M. Datar, Madhav V. Rajan
Publisher:PEARSON
Intermediate Accounting
Accounting
ISBN:9781259722660
Author:J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:9781259726705
Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:McGraw-Hill Education
Asset impairment explained; Author: The Finance Storyteller;https://www.youtube.com/watch?v=lWMDdtHF4ZU;License: Standard Youtube License