On January 1, 2017, RIP Isabel Granada Company purchased a machinery for P600,000, with an estimated economic useful life of 12 years. Straight line method of depreciation is to be used. On December 31, 2020, it was properly determined that the fair value less cost of disposal is P235,000, while the value in use is P240,000. On January 1, 2023, it was properly computed that the recoverable amount of the asset is P250,000. 8) How much is the impairment loss on December 31, 2020? A. 0 B. 110,000 C. 165,000 D. 160,000 9) How much is impairment recovery should be reported on January 1, 2023? A. 50,000 B. 70,000 C. 120,000 D. 0 10) Assuming the recoverable value on January 1, 2023 is P330,000, how much is the recovery from impairment and revaluation surplus, respectively, on January 1, 2023 using the cost model. Recovery from impairment Revaluation Surplus Recovery from impairment Revaluation Surplus A. 120,000 150,000 C. 120,000 30,000 B. 120,000 0 D. 150,000 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, 2017, RIP Isabel Granada Company purchased a machinery for P600,000, with an estimated
economic useful life of 12 years.
was properly determined that the fair value less cost of disposal is P235,000, while the value in use is P240,000.
On January 1, 2023, it was properly computed that the recoverable amount of the asset is P250,000.
8) How much is the impairment loss on December 31, 2020?
A. 0 B. 110,000 C. 165,000 D. 160,000
9) How much is impairment recovery should be reported on January 1, 2023?
A. 50,000 B. 70,000 C. 120,000 D. 0
10) Assuming the recoverable value on January 1, 2023 is P330,000, how much is the recovery from
impairment and revaluation surplus, respectively, on January 1, 2023 using the cost model.
Recovery from
impairment
Revaluation
Surplus
Recovery from
impairment
Revaluation
Surplus
A. 120,000 150,000 C. 120,000 30,000
B. 120,000 0 D. 150,000 0
12) Assuming the recoverable value on January 1, 2023 is P330,000, how much is the recovery from
impairment and revaluation surplus, respectively, on January 1, 2023 using the revaluation model?
Recovery from
impairment
Revaluation
Surplus
Recovery from
impairment
Revaluation
Surplus
A. 120,000 150,000 C. 120,000 30,000
B. 120,000 0 D. 150,000 0
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