Concept explainers
1.
Plant Assets: Plant assets refer to the fixed assets having a useful life of more than a year that is acquired by a company to be used in its business activities for generating revenue.
Intangible Assets: These are the long-term assets having no physical existence. However, the benefits provided by these assets are used by the company for a long period of time. Example: Patent, Trademark,
To explain: whether the accounting treatment for depreciation is in accordance with generally accepted accounting principles.
2.
To explain: whether the accounting treatment for amortization is in accordance with generally accepted accounting principles.
3.
To explain: whether the accounting treatment for building that has a zero book value is in accordance with generally accepted accounting principles.
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FINANCIAL ACCOUNTING: TOOLS WP ACCESS
- 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_forwardThe assistant financial controller of the Negril Group(NG), a public listed company, has identified the matters below which she believes may indicate an impairment to one or more assets: NG owns and operates an item of plant that cost $2,600,000 and had accumulated depreciation of $1,700,000 at 1 October 2014. It is being depreciated at 12% on cost. On 1 April 2015 (exactly half way through the year) the plant was damaged when a factory vehicle collided into it. Due to the unavailability of replacement parts, it is not possible to repair the plant, but it still operates, albeit at a reduced capacity. Also it is expected that as a result of the damage the remaining life of the plant from the date of the damage will be only two years. Based on its reduced capacity, the estimated present value of the plant in use is $700,000. The plant has a current disposal value of $120,000 (which will be nil in two years' time), but NG has been offered a trade–in value of $900,000 against a replacement…arrow_forwardou are working with an accounting firm. Sussie, who is representing Suss Co, needs advice about depreciating assets. She asks; what are depreciating assets? What are the different ways to calculate the declining value of depreciating assets? Furthermore, Suss Co has aggregated turnover of $ 2 billion. In December 2021, Suss Co purchased a machine for $4m, which was commenced immediately for an income-producing purpose. What tax does the Suss Co claim?arrow_forward
- Cottrell incurred the following costs related to its office building. You can assume all costs were paid in cash. (You do not need to record any depreciation related to the office building.) Installed a second air conditioner because it was determined that one air conditioning unit could not sufficiently cool the building, $7,000. Repaired and painted wall damage, $800. Replaced the building roof which was estimated to have a remaining life of less than 5 years, $37,000. The new metal roof should last a minimum of 25 years. Paid property taxes, $9,000.arrow_forwardCompany X incurred the following transactions in the current year. For each transaction, explain the income tax implications. Depreciation on the buildings The company incurred legal expenses opposing an application by its competitor to extend its patent on a brand of mower. If the patent was not extended, then Company X could produce a similar mower. The company borrowed money to cover the purchase of a new plant. The loan is repayable in 10 years. Because of a shortage of working capital, the company was forced to sell off some land. The land had originally been bought in October 1995 The company also purchased a new car for the managing directorarrow_forwardThe property, plant and equipment account of Expert 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?arrow_forward
- As you have seen in Chapter 17, companies depreciate, or write off, the expense of tangible assets such as trucks and equipment over a period of their useful lives. Many companies also have intangible assets that must be accounted for as an expense over a period of time. Intangible assets are resources that benefit the company but do not have any physical substance. Some examples are copyrights, franchises, patents, trademarks, and leases. In accounting, intangible assets are written off in a procedure known as asset amortization. This is much like straight-line depreciation, but there is no salvage value. Suppose you are the accountant for a certain pharmaceutical company. In January 2000, the company purchased the patent rights for a new medication from Novae, Inc., for $18,000,000. The patent had 15 years remaining as its useful life. In January 2005, your pharmaceutical company successfully defended its right to the patent in a lawsuit that cost $630,000 in legal fees. (a) Using…arrow_forwardAfter recording depreciation for the current year, Media Mania Incorporated decided to discontinue using its printing equipment. The equipment had cost $748,000, accumulated depreciation was $547,000, and its fair value (based on estimated future cash flows from selling the equipment) was $48,000. Determine whether the equipment is impaired. Prepare the journal entries to record the impairment in asset if any. Fill in the blank : The fair value is ________ and the book value is ___________ , therefore this asset (is/is not) impaired Record journal entry to remove accumulated depreciation Record journal entry for the impairment lossarrow_forwardBirmingham Company has been in business for five years. Last year, it experienced rapid growth and hired a new accountant to oversee the physical assets and record acquisitions and depreciation. This year, the controller discovered that the accounting records were not in order when the new accountant took over, and a $3,000 depreciation entry was omitted resulting in depreciation expense being understated last year. How does the company make this type of correction and where is it reported?arrow_forward
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