On January 1, 2022, Roxanne Company purchased equipment with cost of P10,000,000, useful life of 10 years and no residual value. The entity used straight line depreciation. On December 31, 2022 and December 31, 2023, the entity determined that impairment indicators are present. There is no change in useful life or residual value. The following information is available for impairment testing at each year-end: December 31, 2022 December 31, 2023 Fair value less cost of disposal 8,100,000 8,400,000 Value in use 8,550,000 8,200,000 1. What is the impairment loss for 2022? A. 900,000 C. 600,000 B. 450,000 D. Zero 2. What is the gain on reversal of impairment for 2023? A. 400,000 B. 800,000 C. 600,000 D. Zero 3. What is the depreciation for 2024? A. 1,000,000 B. 1,050,000 C. 1,025,000 D. 950,000

On January 1, 2022, Roxanne Company purchased equipment with cost of P10,000,000, useful life of 10 years and no residual value. The entity used straight line depreciation. On December 31, 2022 and December 31, 2023, the entity determined that impairment indicators are present. There is no change in useful life or residual value. The following information is available for impairment testing at each year-end: December 31, 2022 December 31, 2023 Fair value less cost of disposal 8,100,000 8,400,000 Value in use 8,550,000 8,200,000 1. What is the impairment loss for 2022? A. 900,000 C. 600,000 B. 450,000 D. Zero 2. What is the gain on reversal of impairment for 2023? A. 400,000 B. 800,000 C. 600,000 D. Zero 3. What is the depreciation for 2024? A. 1,000,000 B. 1,050,000 C. 1,025,000 D. 950,000

Name: On January 1, 2022, Roxanne Company purchased equipment with cost of
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Description: On January 1, 2022, Roxanne Company purchased equipment with cost of P10,000,000, useful life of 10 years and noresidual value. The entity used straight line depreciation. On December 31, 2022 and December 31, 2023, the entitydetermined that impairm

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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Concept explainers

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.

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Question

On January 1, 2022, Roxanne Company purchased equipment with cost of P10,000,000, useful life of 10 years and no
residual value. The entity used straight line depreciation. On December 31, 2022 and December 31, 2023, the entity
determined that impairment indicators are present. There is no change in useful life or residual value. The following
information is available for impairment testing at each year-end:
December 31, 2022 December 31, 2023
8,400,000
8,200,000
Fair value less cost of disposal
8,100,000
Value in use
8,550,000
1. What is the impairment loss for 2022?
A. 900,000
C. 600,000
B. 450,000
D. Zero
2. What is the gain on reversal of impairment for 2023?
A. 400,000
B. 800,000
C. 600,000
D. Zero
3. What is the depreciation for 2024?
C. 1,025,000
D. 950,000
A. 1,000,000
B. 1,050,000

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