Question

In: Accounting

*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 2 years ago
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