*A PPE is acquired for 10.000 $ at the beginning of 2016. It had a useful...

*A PPE is acquired for 10.000 $ at the beginning of 2016. It had a useful life of 5 years. On January 1, 2018 the asset was revalued to 12.000 $. What would be the comprehensive income in year 2018?

a) 6.000

b) 4.000

c) 2.000

d) 3.000

*Suppose that a company has 2 buildings, one for investment (A) and one for administrative (B) purposes. Both properties have an initial cost of 1.000.000 $. The company does not use the cost model and both properties have 10 years of useful lives. A is revalued one year later and the revalued amount is 900.000 $. B is also revalued one year later and the revalued amount is 1.200.000 $. After the revaluation the company immediately sells A at 950.000 $ and sells B at 800.000 $. What is the profit/loss amount in the income statement for all of the transactions above?

a) 50.000 loss

b) 250.000 loss

c) 100.000 profit

d) 150.000 profit

*What does PIRATE stand for intangible assets?

a) Criteria for capitalizing research costs

b) Criteria for capitalizing development costs

c) Criteria for capitalizing directly attributable costs

d) Criteria for capitalizing amortization costs

Solutions

Expert Solution

Solution 1:- Comprehensive income for 2018= Revalued Amount- Current value of PPE

= $12000-[ $ 10000 - $ 2000 ( Depreciation for one year ie, $ 10000/ 5 years ]

= $12000 - $ 8000=$4000 . Option (b) is correct.

Solution 2:- Profit on revaluation of bulding A= Revalued amount- current book value = $ 900000 - [ $ 1000000 - 100000 ( depreciation of year is, $1000000/10years

= $900000 - $ 900000= $0

Profit on sale of building A = sale proceeds- Revalued amount of Building= $950000- $ 900000 = $50000.

Revalution reserves Amount of Building B = Revalued amount- current book value of Building

= $ 1200000- [$1000000- 100000 (depreciation)] = $ 1200000- $ 900000= $300000.

Loss on sale of building B = Revalued amount- sales - consideration - surplus reserved

= $ 1200000- $ 800000 - $ 300000=$100000

Total profit for Income statement= profit of Building A + profit of Building B = $50000+ $ 100000= $ 150000.

Option (d) is correct.

Solution 3 :- Option (b) is correct. PITATE stands for intangible Assets that provides creteria for capitalization of development costs.

ekkarill92 answered 1 year ago

Next > < Previous

Related Solutions

At the beginning of 2016, VHF Industries acquired a equipment with a fair value of $6,339,740...

At the beginning of 2016, VHF Industries acquired a equipment with a fair value of $6,339,740 by issuing a four-year, noninterest-bearing note in the face amount of $8 million. The note is payable in four annual installments of $2 million at the end of each year. 1. What is the effective rate of interest implicit in the agreement? 2. Record these three transactions: 01/01/2016 purchase of the equipment, interest expense on 31/12/2016, and interest expense on 31/12/2017. 3. Suppose the...

The balance of the PPE account for SLOAT, Inc. was $270,500 and $346,000 at the beginning...

The balance of the PPE account for SLOAT, Inc. was $270,500 and $346,000 at the beginning and end (respectively) of 2021. On May 10 the company issued for cash a 6.4%, $20,000 Note Payable that paid simple interest on an annual basis. SLOAT made a debt for equity swap on Dec 31, 2021 (the company’s fye). The no-par common stock account was $500,000 and $720,000, and during the year SLOAT acquired a building by issuing common stock. During the year...

At the beginning of 2016, Metatec Inc. acquired Ellison Technology Corporation for $700 million. In addition...

At the beginning of 2016, Metatec Inc. acquired Ellison Technology Corporation for $700 million. In addition to cash, receivables, and inventory, the following assets and their fair values were also acquired: Plant and equipment (depreciable assets) $ 160 million Patent 50 million Goodwill 110 million The plant and equipment are depreciated over a 10-year useful life on a straight-line basis. There is no estimated residual value. The patent is estimated to have a 5-year useful life, no residual value, and...

At the beginning of 2016, Metatec Inc. acquired Ellison Technology Corporation for $540 million. In addition...

At the beginning of 2016, Metatec Inc. acquired Ellison Technology Corporation for $540 million. In addition to cash, receivables, and inventory, the following assets and their fair values were also acquired: Plant and equipment (depreciable assets) $ 144 million Patent 34 million Goodwill 110 million The plant and equipment are depreciated over a 10-year useful life on a straight-line basis. There is no estimated residual value. The patent is estimated to have a 5-year useful life, no residual value, and...

At the beginning of 2016, Robotics Inc. acquired a manufacturing facility for $12 million. $9 million...

At the beginning of 2016, Robotics Inc. acquired a manufacturing facility for $12 million. $9 million of the purchase price was allocated to the building. Depreciation for 2016 and 2017 was calculated using the straight-line method, a 25-year useful life, and a $1 million residual value. In 2018, the company switched to the double-declining-balance depreciation method. What is depreciation on the building for 2018?

At the beginning of 2016, Metatec Inc. acquired Ellison Technology Corporation for $680 million. In addition...

At the beginning of 2016, Metatec Inc. acquired Ellison Technology Corporation for $680 million. In addition to cash, receivables, and inventory, the following assets and their fair values were also acquired: Plant and equipment (depreciable assets) $ 158 million Patent 48 million Goodwill 120 million The plant and equipment are depreciated over a 10-year useful life on a straight-line basis. There is no estimated residual value. The patent is estimated to have a 5-year useful life, no residual value, and...

At the beginning of 2016, Metatec Inc. acquired Ellison Technology Corporation for $700 million. In addition...

Company ABC acquired a machine at the beginning of the year. The machine had a 6-year...

Company ABC acquired a machine at the beginning of the year. The machine had a 6-year useful life. He expensed the entire acquisition cost in the current year. His error has what effect on current period net income (NI) and retained earnings at the end of the 4th year (RE4)? a. NI is understated; RE4 is understated b. NI is understated; RE4 is correct c. NI is overstated; RE4 is correct d. NI is overstated; RE4 is understated e. None...

At the beginning of 2016, Norris Company had a deferred tax liability of $6,400, because of...

At the beginning of 2016, Norris Company had a deferred tax liability of $6,400, because of the use of MACRS depreciation for income tax purposes and units-of-production depreciation for financial reporting. The income tax rate is 30% for 2015 and 2016, but in 2015 Congress enacted a 37% tax rate for 2017 and future years. Norris’s accounting records show the following pretax items of financial income for 2016: income from continuing operations, $119,300 (revenues of $351,000 and expenses of $231,700);...

At the beginning of 2016, Norris Company had a deferred tax liability of $6,600, because of...

At the beginning of 2016, Norris Company had a deferred tax liability of $6,600, because of the use of MACRS depreciation for income tax purposes and units-of-production depreciation for financial reporting. The income tax rate is 30% for 2015 and 2016, but in 2015 Congress enacted a 39% tax rate for 2017 and future years. Norris’s accounting records show the following pretax items of financial income for 2016: income from continuing operations, $120,000 (revenues of $353,200 and expenses of $233,200);...

Subjects