Pocholo Company reported an impairment loss of P512,000 in its income statement for the year 2016. This loss was related to a building that was acquired on January 1, 2008 with a cost of P4,000,000 (no residual value). Depreciation on the building is computed on a straight-line basis and annual depreciation on cost is P160,000. Depreciation for the year 2017 was computed based on the asset’s recoverable amount at December 31, 2016. On December 31, 2021, the entity decided to measure its building using revaluation model. This building was then appraised to a fair value of P2,100,000. What amount of gain on impairment recovery should Pocholo report in its 2021 income statement? a. 128,000 b. 352,000 c. 512,000 d. 692,000
Pocholo Company reported an impairment loss of P512,000 in its income statement for the year 2016. This loss was related to a building that was acquired on January 1, 2008 with a cost of P4,000,000 (no residual value). Depreciation on the building is computed on a straight-line basis and annual depreciation on cost is P160,000. Depreciation for the year 2017 was computed based on the asset’s recoverable amount at December 31, 2016. On December 31, 2021, the entity decided to measure its building using revaluation model. This building was then appraised to a fair value of P2,100,000. What amount of gain on impairment recovery should Pocholo report in its 2021 income statement? a. 128,000 b. 352,000 c. 512,000 d. 692,000
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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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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Pocholo Company reported an impairment loss of P512,000 in its income statement for the year 2016. This loss was related to a building that was acquired on January 1, 2008 with a cost of P4,000,000 (no residual value). Depreciation on the building is computed on a straight-line basis and annual depreciation on cost is P160,000. Depreciation for the year 2017 was computed based on the asset’s recoverable amount at December 31, 2016.
On December 31, 2021, the entity decided to measure its building using revaluation model. This building was then appraised to a fair value of P2,100,000.
What amount of gain on impairment recovery should Pocholo report in its 2021 income statement?
On December 31, 2021, the entity decided to measure its building using revaluation model. This building was then appraised to a fair value of P2,100,000.
What amount of gain on impairment recovery should Pocholo report in its 2021 income statement?
a. 128,000
b. 352,000
c. 512,000
d. 692,000
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