On 1st March 2011, Earthon LLC bought Equipment to be used as a storage facility at a cost of OMR1,215,000. The company was depreciating the asset on a straight-line basis over a period of 20 years. In the current year, the manager of Earthon LLC raised the depreciation expense of Equipment because the cost of replacing the Equipment had increased-considerably. Considering this situation which one of the following statements is true? Manager can raise the depreciation expense based on the increasing cost of replacement to show faithful representation. Manager cannot raise the depreciation expense based on the increasing cost of replacement show faithful representation. Understandability qualitative characteristic is compromised in the above situation. Timeliness qualitative characteristic is compromised in the above situation. Chapter 5 - IAS 16..pdf A Chapter 5 - IAS 16..pdf A Chapter 4 - IAS 2 i..pdf A 01:12 P EN 心 all T-TI/-V.0 25

On 1st March 2011, Earthon LLC bought Equipment to be used as a storage facility at a cost of OMR1,215,000. The company was depreciating the asset on a straight-line basis over a period of 20 years. In the current year, the manager of Earthon LLC raised the depreciation expense of Equipment because the cost of replacing the Equipment had increased-considerably. Considering this situation which one of the following statements is true? Manager can raise the depreciation expense based on the increasing cost of replacement to show faithful representation. Manager cannot raise the depreciation expense based on the increasing cost of replacement show faithful representation. Understandability qualitative characteristic is compromised in the above situation. Timeliness qualitative characteristic is compromised in the above situation. Chapter 5 - IAS 16..pdf A Chapter 5 - IAS 16..pdf A Chapter 4 - IAS 2 i..pdf A 01:12 P EN 心 all T-TI/-V.0 25

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Jason Co purchased a machinery for £100,000 on 1/1/2018. It had an estimated useful life of ten years and it was depreciated using the reducing balance method at a rate of 20%. On 1/1/20 it was decided to change the depreciation method to the straight line. There was no change to the useful life, and no residual value is anticipated. What are the accumulated depreciation and the net book value of the asset for the year ended 31 December 2021?
Several years ago, a company acquired an asset at a cost of $400,000. Last year, the company recognized an impairment loss of $25,000 and properly reduced the asset's book value from $250,000 to $225,000. Using the asset's new base of $225,000, the company calculates depreciation for the current year to be $10,000, bringing the book value down to $215,000. However, the company has also determined that the asset's fair value has recovered and is now estimated to be $260,000. How should the company measure the asset on its current balance sheet? O The company should reverse the prior impairment and measure the asset at its fair value prior to the initial impairment of $250,000. O The company should not reverse the impairment and should depreciate the asset by $10,000 to a new book value of $215,000. The company should not reverse the impairment and should not depreciate the asset further, leaving the book value at $225,000. O The company should reverse the prior impairment and measure…
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