Kenya 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 P750,000

Kenya 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 P750,000

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

Kim Kwon Digital Components Company assembles circuit boards by using a manually operated machine to insert electronic components. The original cost of the machine is $80,700, the accumulated depreciation is $32,300, its remaining useful life is 5 years, and its residual value is negligible. On May 4 of the current year, a proposal was made to replace the present manufacturing procedure with a fully automatic machine that has a purchase price of $167,900. The automatic machine has an estimated useful life of 5 years and no significant residual value. For use in evaluating the proposal, the accountant accumulated the following annual data on present and proposed operations: PresentOperations ProposedOperations Sales $255,800 $255,800 Direct materials $87,200 $87,200 Direct labor 60,500 — Power and maintenance 5,600 29,900 Taxes, insurance, etc. 2,000 6,700 Selling and administrative expenses 60,500 60,500 Total expenses $215,800 $184,300…
Van Frank Telecommunications has a patent on a cellular transmission process. The company has amortized the $18 million cost of the patent on a straight-line basis since it was acquired at the beginning of 2012. Due to rapid technological advances in the industry, management decided that the patent would benefit the company over a total of six years rather than the nine-year life being used to amortize its cost. The decision was made at the end of 2016 (before adjusting and closing entries). What is the appropriate adjusting entry for patent amortization in 2016 to reflect the revised estimate?
St. Johns River Shipyards' welding machine is 15 years old, fully depreciated, and has no salvage value. However, even though it is old, it is still functional as originally designed and can be used for quite a while longer. A new welder will cost $181,500 and have an estimated life of 8 years with no salvage value. The new welder will be much more efficient, however, and this enhanced efficiency will increase earnings before depreciation from $28,000 to $73,500 per year. The new machine will be depreciated over its 5-year MACRS recovery period, so the applicable depreciation rates are 20.00%, 32.00%, 19.20%, 11.52%, 11.52%, and 5.76%. The applicable corporate tax rate is 25%, and the project cost of capital is 10%. What is the NPV if the firm replaces the old welder with the new one? Do not round intermediate calculations. Round your answer to the nearest dollar. Negative value, if any, should be indicated by a minus sign.
vvv Limited purchased a machine for $300,000 cash on 1 July 2005. The useful life of the machine is 10 years, no residual value and straight line method for depreciation. The company uses the revaluation model. On 31 December 2005, the fair value was $332,500 for the machine. On 31 December 2006, the fair value was $280,500 for the machine. The machine has a fair value of $302,250 on 31 December 2007 and $250,950 on 31 December 2008. Required: Provide the journal entries related to machine.
An old machine that originally cost $9,500 thus far has accumulated depreciation of$1,900. The remaining useful life is four years, with no salvage value at the end of itsuseful life. A new machine is now available that costs $8,500, with a useful life of fiveyears and no residual value. The old machine could be sold now for $1,400. The annualcash operating costs for the old machine are $5,000, but for the new machine theywould be only $2,500. Gross revenue from the products would be $12,000 annually foreither machine. The company shouldA) keep the old machine to avoid a $6,200 loss on its disposal.B) replace the old machine.C) keep the old machine to avoid an $8,500 decrease in cash.D) keep the old machine to avoid a $1,400 loss on its disposal.
On May 1, 2017 Merron Inc. sold a machine that it no longer had any use for. Merron sold the machine for $2,000 cash. The original cost of the machine was $32,000 and at December 31, 2016 the accumulated depreciation on the machine was $26,000. The machine had an original useful life of 10 years with zero estimated residual value. Merron uses the straight-line method to depreciate all of their machines. Required: Prepare the journal entries required for this transaction.
St. Johns River Shipyards' welding machine is 15 years old, fully depreciated, and has no salvage value. However, even though it is old, it is still functional as originally designed and can be used for quite a while longer. A new welder will cost $181, 500 and have an estimated life of 8 years with no salvage value. The new welder will be much more efficient, however, and this enhanced efficiency will increase earnings before depreciation from $28,000 to $73, 500 per year. The new machine will be depreciated over its 5- year MACRS recovery period, so the applicable depreciation rates are 20.00%, 32.00%, 19.20%, 11.52 %, 11.52 %, and 5.76%. The applicable corporate tax rate is 25%, and the project cost of capital is 10%. What is the NPV if the firm replaces the old welder with the new one? Do not round intermediate calculations. Round your answer to the nearest dollar. Negative value, if any, should be indicated by a minus sign. F1 Inflation Adjustments The Rodriguez Company is…
Four years ago Omega Technology, Inc., acquired a machine to use in its computer chip manufacturing operations at a cost of $35,000,000. The firm expected the machine to have a seven-year useful life and a zero salvage value. The company has been using straight-line depreciation for the asset. Due to the rapid rate of technological change in the industry, at the end of Year 4, Omega estimates that the machine is capable of generating (undiscounted) future cash flows of $11,000,000. Based on the quoted market prices of similar assets, Omega estimates the machine to have a fair value of $9,500,000. What is the machine’s book value at the end of Year 4? Should Omega recognize an impairment of this asset? If so, what amount of the impairment loss should be recognized? At the end of Year 4, at what amount should the machine appear in Omega’s balance sheet
Irwin, Inc., constructed a machine at a total cost of $35 million. Construction was completed at the end of 2014and the machine was placed in service at the beginning of 2015. The machine was being depreciated over a10-year life using the sum-of-the-years’-digits method. The residual value is expected to be $2 million. At thebeginning of 2018, Irwin decided to change to the straight-line method. Ignoring income taxes, what journalentry(s) should Irwin record relating to the machine for 2018?
vvv Limited purchased a machine for $300,000 cash on 1 July 2005. The useful life of the machine is 10 years, no residual value and straight line method for depreciation. The company uses the revaluation model. On 31 December 2005, the fair value was $332,500 for the machine. On 31 December 2006, the fair value was $280,500 for the machine. The machine has a fair value of $302,250 on 31 December 2007 and $250,950 on 31 December 2008. Required: Provide the journal entries related to machine.
Waterway Industries bought a machine on January 1, 2011 for $802000. The machine had an expected life of 20 years and was expected to have a salvage value of $84000. On July 1, 2021, the company reviewed the potential of the machine and determined that its future net cash flows totaled $397000 and its fair value was $305000. If the company does not plan to dispose of it, what should Waterway record as an impairment loss on July 1, 2021? Correct Answer $120050. Please show work thank you
Paradise, a manufacturer located in rural New Brunswick, purchased a widget-making machine in2017 and depreciated it using the double-declining-balance method. As at Paradise’s fiscal year-end in2021 (March 31, 2021), the net book value of the widget-making machine was $500,000.On March 31, 2021, Paradise realized that there were breakthroughs in widget manufacturing whichwould put their machine into obsolescence in exactly 7 years. The widget-making machine wasappraised to have a fair value of $400,000; costs of disposal of $15,000; future discounted netcashflows of $415,000; and future undiscounted net cashflows of $450,000.Paradise plans to use the machine for the next 7 years while it invests in research and development(R&D) to construct an in-house piece of widget-making equipment. Starting on April 1, 2021, however,Paradise will switch to the straight line method of depreciation.Required(a) If required, prepare the journal entry(ies) in good form to record impairment loss…