Case E Robert Sporting Goods Company has another piece of equipment (Q102) with the following cost and accumulated depreciation at its year ended December 31, 2020: Equipment (Q102) $9 000 000 Accumulated Depreciation 3 000 000 Due to obsolescence and physical damage, the equipment was found to be impaired. At the year-end Robert Sporting Goods Company had determined the following information: Fair value less cost of Disposal $4 500 000 Value in use or discounted net cash flows 4 000 000 Undiscounted net cash flows 5 500 000

Case E Robert Sporting Goods Company has another piece of equipment (Q102) with the following cost and accumulated depreciation at its year ended December 31, 2020: Equipment (Q102) $9 000 000 Accumulated Depreciation 3 000 000 Due to obsolescence and physical damage, the equipment was found to be impaired. At the year-end Robert Sporting Goods Company had determined the following information: Fair value less cost of Disposal $4 500 000 Value in use or discounted net cash flows 4 000 000 Undiscounted net cash flows 5 500 000

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

Chapter7: Operating Assets

Section: Chapter Questions

Problem 9MCQ: Chapman Inc. purchased a piece of equipment in 2018. Chapman depreciated the equipment on a...

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Chapman Inc. purchased a piece of equipment in 2018. Chapman depreciated the equipment on a straight-line basis over a useful life of 10 years and used a residual value of $12,000. Chapmans depreciation expense for 2019 was $11,000. What was the original cost of the building? a. $98,000 b. $110,000 c. $122,000 d. $134,000
At the end of 2020, Magenta Manufacturing Company discovered that construction cost had been capitalized as a cost of the factory building in 2015 when it should have been treated as a cost of production equipment installation costs. As a result of the misclassification, the depreciation through 2018 was understated by 110,000, and depreciation for 2019 was understated by 90,000. What would be the consequences of correcting for the misclassification of the property cost? a. The taxpayer uses the FIFO inventory method, and 25% of goods produced during the period were included in the ending inventory. b. The taxpayer uses the LIFO inventory method, and no new LIFO layer was added during 2019.
Which of the following is not true about the MACRS depreciation system: A salvage value must be determined before depreciation percentages are applied to depreciable real estate. Residential rental buildings are depreciated over 27.5 years straight-line. Commercial real estate buildings are depreciated over 39 years straight-line. No matter when during the month depreciable real estate is purchased, it is considered to have been placed in service at mid-month for MACRS depreciation purposes.
On July 1, 2018, Mundo Corporation purchased factory equipment for 50,000. Residual value was estimated at 2,000. The equipment will be depreciated over 10 years using the double-declining balance method. Counting the year of acquisition as one-half year, Mundo should record 2019 depredation expense of: a. 7,680 b. 9,000 c. 9,600 d. 10,000
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?
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.
Robert Sporting Goods Company has another piece of equipment (Q102) with the following cost and accumulated depreciation at its year ended December 31, 2020:                         Equipment (Q102)                                          $9 000 000                         Accumulated Depreciation                             3 000 000 Due to obsolescence and physical damage, the equipment was found to be impaired. At the year-end Robert Sporting Goods Company had determined the following information:                         Fair value less cost of Disposal                                  $4 500 000                         Value in use or discounted net cash flows                    4 000 000                         Undiscounted net cash flows                                         5 500 000 Required: Assess equipment (Q102) for impairment and prepare the journal entry (if necessary) to report any impairment loss for the year. When selecting from dropdown lists, if a line…
Robert Sporting Goods Company has another piece of equipment (Q102) with the following cost and accumulated depreciation at its year ended December 31, 2020:                         Equipment (Q102)                                          $9 000 000                         Accumulated Depreciation                             3 000 000 Due to obsolescence and physical damage, the equipment was found to be impaired. At the year-end Robert Sporting Goods Company had determined the following information:                         Fair value less cost of Disposal                                  $4 500 000                         Value in use or discounted net cash flows                    4 000 000                         Undiscounted net cash flows                                         5 500 000 Required: Assess equipment (Q102) for impairment and prepare the journal entry (if necessary) to report any impairment loss for the year. When selecting from dropdown lists, if a line…
Case E Robert Sporting Goods Company has another piece of equipment (Q102) with the following cost and accumulated depreciation at its year ended December 31, 2020:                         Equipment (Q102)                                          $9 000 000                         Accumulated Depreciation                             3 000 000 Due to obsolescence and physical damage, the equipment was found to be impaired. At the year-end Robert Sporting Goods Company had determined the following information:                         Fair value less cost of Disposal                                  $4 500 000                         Value in use or discounted net cash flows                    4 000 000                         Undiscounted net cash flows                                         5 500 000 Required: Assess equipment (Q102) for impairment and prepare the journal entry (if necessary) to report any impairment loss for the year. When selecting from dropdown lists, if a line item…
Case E Robert Sporting Goods Company has another piece of equipment (Q102) with the following cost and accumulated depreciation at its year ended December 31, 2020: Equipment (Q102) $9 000 000 Accumulated Depreciation 3 000 000 Due to obsolescence and physical damage, the equipment was found to be impaired. At the year-end Robert Sporting Goods Company had determined the following information: Fair value less cost of Disposal $4 500 000 Value in use or discounted net cash flows 4 000 000 Undiscounted net cash flows 5 500 000 Required: Assess equipment (Q102) for impairment and prepare the journal entry (if necessary) to report any impairment loss for the year. When selecting from dropdown lists, if a…
On January 2, 2018, Rahaf purchased equipment with a cost of HK$2,088,000, a useful life of 10 years and no salvage value. The company uses straight-line depreciation. At December 31, 2018 and December 31, 2019, the company determines that impairment indicators are present. The following information is available for impairment testing at each year end: 12/31/2018 12/31/2019 Fair value less costs to sell HK$1,863,000 Hk$1,770,000 Value-in-use HK$1,870,000 HK$1,783,000 There is no change in the asset's useful life or salvage value. The 2018 income statement will report Impairment Loss of HK$
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…