On January 2, 2020, Quezon Inc. purchased equipment with a cost ofP10,500,000, a useful life of 12 years and no salvage value. The Companyuses sum-of-the-years-digit method of depreciation. At December 31, 2020and December 31, 2021, the company determines that impairment indicatorsare present. The following information is available for impairment testing ateach year end:12/31/202012/31/2021Fair value less cost to sellP8,515,000P7,530,000Value-in-useP8,551,000P7,315,000There is no change in the asset's useful life or salvage value. The 2021income statement will report gain on recovery of?

Impairment Loss is the difference between Carrying Amount and Recoverable Amount. Recoverable…

Answered: There is no change in the asset's…

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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With regards to depreciation, which of the following is not true? O Straight Line depreciation includes initial cost and salvage value in the depreciation calculation. In straight line depreciation, the depreciation life (n) is set based on the MACRS property class. MACRS Depreciation method is the only method allowed for accounting and tax purposes. In MACRS depreciation, the salvage value is assumed to be zero. In straight line depreciation, the asset is depreciated down to a book value equal to the salvage value.
Which of the following statements is correct with respect to the sale of a depreciable asset? Multiple Choice A gain occurs when the selling price exceeds book value. A sale for a gain results in a decrease in total assets. A sale for a loss results in an increase in total assets. A loss occurs when the selling price is more than book value.
Which of the following is true? O The book value at the end of an asset's useful life will be the same under all the depreciation methods allowed under generally accepted accounting principles. The annual depreciation expense will usually differ under the various depreciation methods. The total depreciation in the accumulated depreciation account will be the same at the end of the asset's useful life under all the methods allowed under generally accepted accounting principles. O All are true.
When the estimate of an asset's useful life is changed, * depreciation expense for past periods must be recalculated. depreciation expense for future years is not changed. depreciation expense for the current and future years is changed. None of the above
what is the ultimate purpose of long-term assets? How should the cost of these assets be allocated over the asset's useful life? Why is depreciation not synonymous with valuation?
Which of the following methods is used to amortize intangible assets over their useful lives? a. a declining balance methodb. straight linec. annual review for impairmentd. intangible assets are not amortized
The basic principle of valuation states that the value of any asset is: O The sum of the present value of all cash flows generated by the assetO The sum of all future cash flows generated by the assetO The present value of next year's cash flow onlyO The degree of cash flow riskiness is not a relevant factor in valuation
For accounting purposes, depreciation refers to the process of ________. A. estimating an asset's current market value B. allocating the cost of a plant asset to expense over its useful life C. recording the decline in the market value of an asset to its book value D. determining the selling price of an asset
Which depreciation method ignores residual value when computing the depreciable base of an asset? a. sum-of-the-year's-digits b. double-declining-balance c. composite depreciation d. group depreciation
Depreciation expense under the invenroty system is a. Based on cost minus residual value b. Basically a FIFO approach to depreciable asset accounting c. The result of applying a depreciation rate to the original cost d. A measure of the change in the value of the depreciable asset
Which of the following best describes depreciation?A It is a means of spreading the payment for the asset over its total estimated lifeB It represents the decline in the market value of the assetC It is a means of spreading the cost of an asset over its estimated useful lifeD It is a way of estimating the cash needed to replace the asset in the future
What is the difference between the cost of a fixed asset and its accumulated depreciation called? Group of answer choices book value current value fixed value equity value

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There is no change in the asset's useful life or salvage value. The 2021 income statement will report gain on recovery of?