On January 1, 2021, SMC decided to dispose of an item of plant that is carried in its records at a cost of P1,000,000, with accumulated depreciation of P200,000. Depreciation on the plant since it was originally acquired has been charged at P10,000 per month. The plant will continue to be operated until it is sold, at which time the operations of the plant will be outsourced. The company undertook all the necessary action to be able to classify the asset as held for sale. It is estimated that it could sell the plant for its fair value of P720,000, incurring P20,000 selling costs in the process. The plant has been depreciated at an amount of P10,000 per month. On March 31, 2021, the plant had not been sold but, due to shortage of this type of plant, there had been an increase in the fair value to P770,000. On June 30, 2021, SMC sold the plant for P785,000, incurring P25,000 selling costs. As a result of your audit, Required: a. Calculate the impairment loss on January 1, 2021 b. Depreciation expense for 2021 Gain to be recognized in profit or loss as a result of increase in the fair value of the plant d. Gain on sale of plant on June 30, 2021 C.

On January 1, 2021, SMC decided to dispose of an item of plant that is carried in its records at a cost of P1,000,000, with accumulated depreciation of P200,000. Depreciation on the plant since it was originally acquired has been charged at P10,000 per month. The plant will continue to be operated until it is sold, at which time the operations of the plant will be outsourced. The company undertook all the necessary action to be able to classify the asset as held for sale. It is estimated that it could sell the plant for its fair value of P720,000, incurring P20,000 selling costs in the process. The plant has been depreciated at an amount of P10,000 per month. On March 31, 2021, the plant had not been sold but, due to shortage of this type of plant, there had been an increase in the fair value to P770,000. On June 30, 2021, SMC sold the plant for P785,000, incurring P25,000 selling costs. As a result of your audit, Required: a. Calculate the impairment loss on January 1, 2021 b. Depreciation expense for 2021 Gain to be recognized in profit or loss as a result of increase in the fair value of the plant d. Gain on sale of plant on June 30, 2021 C.

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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