On January 1, 2014, Barbed Company purchased an equipment for P900,000, with an estimated useful life of 8 years. Straight-line method of depreciation is to be used with no salvage value. On January 1, 2017, the equipment was tested for impairment. The estimated selling price of the equipment is P550,000 and the estimated cost to sell is P30,000. The asset is expected to provide annual net cash inflows of P145,000 during the remaining useful life of the equipment and estimated a residual value of P35,000 at the end of its useful life. The appropriate pre-tax discount rate that reflects current market assessments of the time value of money is 12%. 26) How much is the recoverable value of the equipment on January 1, 2017? A 520,000 C. 550,000 . B. 542,570 D. 562,500 27) How much is the impairment loss to be recognized on January 1, 2017? A . 12,500 C. 19,930 B. 42,500 D. 0
Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
On January 1, 2014, Barbed Company purchased an equipment for P900,000, with an estimated useful life of 8
years. Straight-line method of
equipment was tested for impairment. The estimated selling price of the equipment is P550,000 and the
estimated cost to sell is P30,000. The asset is expected to provide annual net
the remaining useful life of the equipment and estimated a residual value of P35,000 at the end of its useful
life. The appropriate pre-tax discount rate that reflects current market assessments of the time value of money
is 12%.
26) How much is the recoverable value of the equipment on January 1, 2017?
A 520,000 C. 550,000 .
B. 542,570 D. 562,500
27) How much is the impairment loss to be recognized on January 1, 2017?
A
.
12,500 C. 19,930
B. 42,500 D. 0
28) How much is the depreciation expense for the year 2017?
A
.
108,514 C. 103,000
B. 101,514 D. 112,500
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
