Ermon Company determined that its electronics division is a cash generating unit. The entity calculated the value in use of the division at P8,000,000. The carrying amounts of the assets are: Building P5,000,000; Equipment - P3,000,000; and Inventory - P2,000,000. The entity also determined that the fair value less cost of disposal of the building is P4,500,000. What is the impairment loss to be allocated to the equipment? A. 1,000,000 B. 900,000 C. 600,000 D. 400,000

Ermon Company determined that its electronics division is a cash generating unit. The entity calculated the value in use of the division at P8,000,000. The carrying amounts of the assets are: Building P5,000,000; Equipment - P3,000,000; and Inventory - P2,000,000. The entity also determined that the fair value less cost of disposal of the building is P4,500,000. What is the impairment loss to be allocated to the equipment? A. 1,000,000 B. 900,000 C. 600,000 D. 400,000

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

Subject: accounting
PSc 3-4 Calculate Federal Income Tax Withholding Using the Percentage Method (Pre-2020 Form W-4) For each employee listed, use the percentage method to calculate federal income tax withholding for an employee who has submitted a pre-2020 Form W-4.Refer to Publication 15-T. NOTE: For simplicity, all calculations throughout this exercise, both intermediate and final, should be rounded to two decimal places at each calculation. 1: Tony Daniels (Married; 4 federal withholding allowances) earned weekly gross pay of $790. Federal income tax withholding = $ 2: Mario Gonzales (married; 5 federal withholding allowances) earned biweekly gross pay of $2,010. He participates in a flexible spending account, to which he contributes $110 during the period. Federal income tax withholding = $ 3: Angela Brown (single; 3 federal withholding allowances) earned monthly gross pay of $5,085. For each period, she makes a 401(k) contribution of 13.5% of gross pay. Federal income tax withholding = $ 4: Linda…
Impairment is defined as a reduction in the value of a company asset, whether fixed or intangible which decline the asset's quality, quantity, or market value. (a) The carrying amount of a machinery is RM525,000. This consists of goodwill of RM75,000, development costs of RM150,000 and machinery of RM300,000. The machinery has a recoverable amount of RM330,000. Calculate the carrying amount of the machinery after the impairment loss has been allocated.
Virtual Co. incurred research and development costs in 2023 as follows: Materials used in research and development projects $ 450,000 Equipment acquired that will have alternate future uses in future research and development projects 3,000,000 Depreciation for 2023 on above equipment 300,000 Personnel costs of persons involved in research and development projects 750,000 Consulting fees paid to outsiders for research and development projects 300,000 Indirect costs reasonably allocable to research and development projects 225,000 Total $5,025,000 Assume economic viability has not been achieved. What amount of research and development costs should be charged to Virtual’s 2023 income statement
A company has seven assets (labelled 1 to 7) for which there are indications of possible impairment. The carrying amount, fair value less costs of disposal and value in use for each asset are as shown below. Carrying Amount Fair Value less costs of disposal Value in use $ $ $ Asset 1 25,000 30,000 45,000 Asset 2 27,500 22,500 32,500 Asset 3 17,500 28,750 n/d Asset 4 21,250 16,250 17,500 Asset 5 31,875 n/d 42,000 Asset 6 25,000 35,000 30,000 Asset 7 52,500 37,500 25,000 Note: n/d = not determined Required: a. Calculate the amount of any impairment loss arising in relation to each asset. (Show Recoverable Amount) b. Briefly describe how impairment loss is determined. c. Briefly explain how you determined if there was an impairment loss for assets 4 and 6.
AF’s property, plant, and equipment is reported at cost. The company has a policy ofnot revaluing property, plant, and equipment. Suppose AF decided to revalue its flightequipment on December 31, 2015, and that the fair value of the equipment on that datewas €10,000 million. Prepare the journal entry to record the revaluation, assuming thatthe journal entry to record annual depreciation had already been recorded. (Hint: youwill need to locate the original cost and accumulated depreciation of the equipment atthe end of the year in the appropriate disclosure note.)
Blossom Corp. exchanged Building 24, which has an appraised value of $1,896,000, a cost of $2,722,000, and accumulated depreciation of $1,248,000, for Building M which belongs to Splish Ltd. Building M has an appraised value of $1,600,000, a cost of $3,182,000, and accumulated depreciation of $1,782,000. Splish paid Blossom the difference between the appraised values of the two buildings. Assume depreciation has been updated to the date of exchange. Prepare the entries on both companies' books, assuming the buildings are similar assets and there is no commercial substance for either company. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. List all debit entries before credit entries.) Account Titles Blossom Corp. Buildings Accumulated Depreciation - Buildings Buildings Cash Debit 1243882 1248000 296000 Credit 2722000
On January 1, 2010, P Company acquired the net assets of S Company for $1,580,000 cash. The fair value of S Co. identifiable net assets was $1,310,000 on this date. P Company decided to measure goodwill impairment using the present value of future cash flows to estimate the fair value of the reporting unit (S Co.). The information for these subsequent years is as follows: Carrying value of S Co. Identifiable Net Assets $1,160,000 $1,120,000 Fair Value SCo. Identifiable Net Assets $1,190,000 $1,210,000 Present value of Future Cash Flows $1,390,000 $1,400,000 * Identifiable net assets do not include goodwill. Year 2011 2012 Choose the correct answer: In year 2011 S Company had: * Excess of fair value over carrying value of $30,000 Excess of carrying value over fair value of $30,000 Excess of fair value over carrying value of $40,000 Excess of carrying value over fair value of $40,000 None of the options is correct
CAKE Corporation exchanged a piece of equipment for new equipment. Data pertaining to the old equipment follows: Cost-P500,000; Accumulated Depreciation, P300,000; Fair value of old equipment, P180,000. The fair value of the new equipment is P230,000 and CAKE Corporation paid P50,000 to complete the exchange transaction. Assuming the configuration of the cash flows of the equipment is significantly different, how much is the gain or loss on exchange?
Munabhai
Collins Corporation purchased office equipment at the beginning of 2022 and capitalized a cost of $1,938,000. This cost figure included the following expenditures: Purchase price Freight charges Installation charges Annual maintenance charge Total $ 1,790,000 24,000 14,000 110,000 $ 1,938,000 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. Ignoring income taxes, prepare any 2024 journal…
Toro Co. has equipment with a carrying amount of $700,000. The value-in-use of the equipment is $705,000, and its fair value less costs of disposal is $590,000. The equipment is expected to be used in operations in the future. What amount (if any) should Toro report as an impairment to its equipment?