On 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?

On 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?

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter22: Accounting For Changes And Errors.

Section: Chapter Questions

Problem 11E: On January 1, 2014, Klinefelter Company purchased a building for 520,000. The building had an...

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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.
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.
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?
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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: 12/31/2020 12/31/2021 Fair value less cost to sell P8,515,000 P7,530,000 Value-in-use P8,551,000 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?
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On January 1, 2020, Joker Company purchased equipment with cost of P10,000,000, useful life of 10 years and no residual value. The entity used straight line depreciation. On December 31, 2020 and December 31, 2021, the entity determined that impairment indicators are present. The following information is available for impairment testing at each year end: December 31, 2020 December 31, 2021Fair value less cost of disposal 8,100,000 8,400,000Value in use 8,550,000 8,200,000 There is no change in useful life or residual value. What amount should be reported in the income statement for 2021?
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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…