On July 1, 2021, Whiskey Company had an equipment with cost of P5,000,000 and accumulated depreciation of P3,000,000. On that date, the entity classified the equipment as held for sale. On same date, the equipment had an estimated selling price of P1,300,000, estimated selling cost of P100,000 and remaining life of 4 years. On December 31, 2021, the estimated selling price of the equipment had increased to P1,500,000 with estimated selling cost of P50,000. What amount should be reported as gain on reversal of impairment in 2021?
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On July 1, 2021, Whiskey Company had an equipment with cost of P5,000,000 and
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- Gray Companys financial statements showed income before income taxes of 4,030,000 for the year ended December 31, 2020, and 3,330,000 for the year ended December 31, 2019. Additional information is as follows: Capital expenditures were 2,800,000 in 2020 and 4,000,000 in 2019. Included in the 2020 capital expenditures is equipment purchased for 1,000,000 on January 1, 2020, with no salvage value. Gray used straight-line depreciation based on a 10-year estimated life in its financial statements. As a result of additional information now available, it is estimated that this equipment should have only an 8-year life. Gray made an error in its financial statements that should be regarded as material. A payment of 180,000 was made in January 2020 and charged to expense in 2020 for insurance premiums applicable to policies commencing and expiring in 2019. No liability had been recorded for this item at December 31, 2019. The allowance for doubtful accounts reflected in Grays financial statements was 7,000 at December 31, 2020, and 97,000 at December 31, 2019. During 2020, 90,000 of uncollectible receivables were written off against the allowance for doubtful accounts. In 2019, the provision for doubtful accounts was based on a percentage of net sales. The 2020 provision has not yet been recorded. Net sales were 58,500,000 for the year ended December 31, 2020, and 49,230,000 for the year ended December 31, 2019. Based on the latest available facts, the 2020 provision for doubtful accounts is estimated to be 0.2% of net sales. A review of the estimated warranty liability at December 31, 2020, which is included in other liabilities in Grays financial statements, has disclosed that this estimated liability should be increased 170,000. Gray has two large blast furnaces that it uses in its manufacturing process. These furnaces must be periodically relined. Furnace A was relined in January 2014 at a cost of 230,000 and in January 2019 at a cost of 280,000. Furnace B was relined for the first time in January 2020 at a cost of 300,000. In Grays financial statements, these costs were expensed as incurred. Since a relining will last for 5 years, Grays management feels it would be preferable to capitalize and depreciate the cost of the relining over the productive life of the relining. Gray has decided to nuke a change in accounting principle from expensing relining costs as incurred to capitalizing them and depreciating them over their productive life on a straight-line basis with a full years depreciation in the year of relining. This change meets the requirements for a change in accounting principle under GAAP. Required: 1. For the years ended December 31, 2020 and 2019, prepare a worksheet reconciling income before income taxes as given previously with income before income taxes as adjusted for the preceding additional information. Show supporting computations in good form. Ignore income taxes and deferred tax considerations in your answer. The worksheet should have the following format: 2. As of January 1, 2020, compute the retrospective adjustment of retained earnings for the change in accounting principle from expensing to capitalizing relining costs. Ignore income taxes and deferred tax considerations in your answer.On May 10, 2019, Horan Company purchased equipment for 25,000. The equipment has an estimated service life of 5 years and zero residual value. Assume that the straight-line depreciation method is used. Required: Compute the depreciation expense for 2019 for each of the following four alternatives: 1. Horan computes depreciation expense to the nearest day. (Use 12 months of 30 days each and round the daily depreciation rate to 2 decimal places.) 2. Horan computes depreciation expense to the nearest month. Assets purchased in the first half of the month are considered owned for the whole month. 3. Horan computes depreciation expense to the nearest whole year. Assets purchased in the first half of the year are considered owned for the whole year. 4. Horan records one-half years depreciation expense on all assets purchased during the year.On January 1, 2014, Klinefelter Company purchased a building for 520,000. The building had an estimated life of 20 years and an estimated residual value of 20,000. The company has been depreciating the building using straight-line depreciation. At the beginning of 2020, the following independent situations occur: a. The company estimates that the building has a remaining life of 10 years (for a total of 16 years). b. The company changes to the sum-of-the-years-digits method. c. The company discovers that it had ignored the estimated residual value in the computation of the annual depreciation each year. Required: For each of the independent situations, prepare all journal entries related to the building for 2020. Ignore income taxes.
- On July 1, 2018, Mundo Corporation purchased factory equipment for 50,000. Residual value was estimated at 2,000. The equipment will be depreciated over 10 years using the double-declining balance method. Counting the year of acquisition as one-half year, Mundo should record 2019 depredation expense of: a. 7,680 b. 9,000 c. 9,600 d. 10,000Hunter Company purchased a light truck on January 2, 2019 for 18,000. The truck, which will be used for deliveries, has the following characteristics: Estimated life: 5 years Estimated residual value: 3,000 Depreciation method for financial statements: straight-line method Depreciation for income tax purposes: MACRS (3-year life) From 2019 through 2023, each year, Hunter had sales of 100,000, cost of goods sold of 60,000, and operating expenses (excluding depreciation) of 15,000. The truck was disposed of on December 31, 2023, for 2,000. Required: 1. Prepare an income statement for financial reporting through pretax accounting income for each of the 5 years, 2019 through 2023. 2. Prepare, instead, an income statement for income tax purposes through taxable income for each of the 5 years, 2019 through 2023. 3. Compare the total income for all 5 years under Requirements 1 and 2.Bliss Company owns an asset with an estimated life of 15 years and an estimated residual value of zero. Bliss uses the straight -line method of depreciation. At the beginning of the sixth year, the assets book value is 200,000 and Bliss changes the estimate of the assets life to 25 years, so that 20 years now remain in the assets life. Explain how this change will be accounted for in Blisss financial statements, and compute the current and future annual depreciation expense.
- Kam Company purchased a machine on January 2, 2019, for 20,000. The machine had an expected life of 8 years and a residual value of 300. The double-declining-balance method of depreciation is used. Required: 1. Compute the depreciation expense for each year of the assets life and book value at the end of each year. 2. Assuming that the company has a policy of always changing to the straight-line method at the midpoint of the assets life, compute the depreciation expense for each year of the assets life. 3. Assuming that the company always changes to the straight-line method at the beginning of the year when the annual straight-line amount exceeds the double-declining-balance amount, compute the depreciation expense for each year of the assets life.During 2019, Ryel Companys controller asked you to prepare correcting journal entries for the following three situations: 1. Machine A was purchased for 50,000 on January 1, 2014. Straight-line depreciation has been recorded for 5 years, and the Accumulated Depreciation account has a balance of 25,000. The estimated residual value remains at 5,000, but the service life is now estimated to be 1 year longer than estimated originally. 2. Machine B was purchased for 40,000 on January 1, 2017. It had an estimated residual value of 5,000 and an estimated service life of 10 years. it has been depreciated under the double-declining-balance method for 2 years. Now, at the beginning of the third year, Ryel has decided to change to the straight-line method. 3. Machine C was purchased for 20,000 on January 1, 2018, Double-declining-balance depreciation has been recorded for 1 year. The estimated residual value of the machine is 2,000 and the estimated service life is 5 years. The computation of the depreciation erroneously included the estimated residual value. Required: Prepare any necessary correcting journal entries for each situation. Also prepare the journal entry necessary for each situation to record depreciation expense for 2019.On July 1, 2021, RJ Components had an equipment with cost of P5,000,000 and accumulated depreciation of P3,000,000. On that date, the entity classified the equipment as held for sale. On the same date, the equipment had an estimated selling price of P1,300,000, estimated selling cost of P100,000 and remaining life of of 4 years. On December 31, 2021, the estimated selling price of the equipment had increased to P1,500,000 with an estimated selling cost of P50,000. What amount should be reported as gain on reversal of impairment in 2021? A. 800000B. 200000C. 250000D. 300000
- On April 1, 2021, Brandy Company had a machine with a cost of P5,000,000 and accumulated depreciation of P3,750,000. On April 1, 2021, the entity classified the machine as held for sale and decided to sell the machine within one year. On April 1, 2021, the machine had an estimated selling price of P500,000 with estimated disposal cost of P50,000 and a remaining useful life of two years. On December 31, 2021, the estimated selling price of the machine had increased to P750,000 with estimated disposal cost of P100,000. What amount should be recognized as impairment loss on April 1, 2021?On January 1, 2019, Fur Company purchased a machinery at a cost of P goods 21,000,000 with an estimated useful life of 10 years and scrap value of P 1,000,000. The double declining balance method of depreciation is used by the entity. In January 2021, it is estimated that the useful life of the machinery from acquisition date should have been 7 years while the residual value should have been P 960,000. What is the depreciation expense for the year 2021? P 6,384,000 P 2,688,000 P 2,352,000 P 5,376,000EMSN Corp. purchased PPE on January 1, 2020 for $7,221,000. The production estimates the asset will be used for 5 years, after which it can be sold for $578,000 based on these estimates, what is the depreciation expense in 2021 on this asset if the ompann-of-the-year's-digits method for calculating depreciation? 2,214,333 1,771,467 $1,328,600 There is not enough information to answer this question. On July 1, 2020, Bodhi purchased equipment for $4,295,000. The salvage value of the equipment is estimated to be $515,000 and the management team believes that the equipment can be used for 5 years. Assuming the company uses the straight line method and follows FASB's preferences for recording partial year depreciation, what should the company record as depreciation expense in 2020? 378,000 $ 756,000 $3,539,000 $3,917,000 Which of the following would be considered a capital expenditure? (A 22) O Making a payment on accounts payable O Paying accumulated income taxes O Paying shipping…