In: Accounting
1.On January 1, 2020, KJ Inc. acquired an equipment for P2,400,000 with residual value of P400,000 and useful life of 8 years. On December 31, 2023, due to hyperinflation, KJ Inc. tested for impairment the equipment. As of this date, the fair value of the equipment is P1,500,000 and the related disposal cost is P300,000 while the value in use of the equipment is P1,350,000. On December 31, 2024, the fair value of the equipment is P1,700,000 and the related disposal cost is P400,000 while the value in use of the equipment is P1,500,000. Using the same data, what is the gain on reversal of impairment loss to be recognized in year 2024? *
P387,500
P187,500
P37,500
P50,000
2.On January 1, 2020, KJ Inc. acquired an equipment for P2,400,000 with residual value of P400,000 and useful life of 8 years. On December 31, 2023, due to hyperinflation, KJ Inc. tested for impairment the equipment. As of this date, the fair value of the equipment is P1,500,000 and the related disposal cost is P300,000 while the value in use of the equipment is P1,350,000. On December 31, 2024, the fair value of the equipment is P1,700,000 and the related disposal cost is P400,000 while the value in use of the equipment is P1,500,000. What is the carrying amount to be presented on the equipment as of December 31, 2024? *
P1,112,500
P1,150,000
P1,500,000
P1,300,000
3.KJ Company had a machinery costing P3,000,000 when purchased on January 2, 2015. Estimated useful life of the asset was for 20 years with no salvage value at the end of its useful life. KJ uses the straight line method of Depreciation. On January 2, 2020, KJ is evaluating the machinery for possible impairment. The machinery has a remaining useful life of 5 years and is expected to generate cash inflows of P500,000 per year. KJ has determined that the rate implicit in current market transaction for similar asset is 10%. Available information as of January 2, 2020 also showed that the appropriate market price for the same asset is P1,950,000. Estimated cost of disposal, P150,000.What amount of Impairment loss, if any, is to be recognized? *
300,000
450,000
355,000
0
4.On January 1, 2015, KJ Company purchased a new building at a cost of P3,000,000. Depreciation was computed on the straight line basis at 4% per year. On January 1, 2020, the building was revalued at a fair value of P4,000,000. To record the revaluation the following journal entry was made: Dr. Building 1,000,000 Cr. Retained Earnings 1,000,000 Correcting entry will include which of the following? *
Credit Retained Earnings at 600,000
Credit Revaluation Surplus of P1,000,000
Debit Building of P2,000,000
Credit Accumulated Depreciation of 400,000
5.On January 1, 2015, KJ Company purchased a new building at a cost of P3,000,000. Depreciation was computed on the straight line basis at 4% per year. On January 1, 2020, the building was revalued at a fair value of P4,000,000. To record the revaluation the following journal entry was made: Dr. Building 1,000,000 Cr. Retained Earnings 1,000,000 What is the Accumulated Depreciation on Replacement Cost on January 1, 2020? *
400,000
600,000
1,000,000
1,600,000
6.KJ Company determined that, due to the obsolescence, equipment with an original cost of P180,000 and accumulated depreciation at January 1, 2020 of P84,000 had suffered permanent impairment, and as a result should have a fair value of only P60,000 as of the beginning of the year. Additionally, the remaining useful life of the equipment was reduced from eight years to three years. In its December 31, 2020 Income statement, how much should be reflected as Depreciation? *
104,000
20,000
140,000
120,000
There is Imapairment of Asset if Carrying cost of asset is greater than its repacement cost
replacement cost of the asset is greater of value in use or Fairvalue - disposal cost whichever is higher
2) FV as on 31.12.2024 is 1700000-400000=1300000
Value in use =1500000
therefore, replacement value is 1500000
carrying amount is 2400000-1250000=1150000
3)
In given Case, asset puchased on jan 2, 2015 at 3000000
Depreciation after 5 years will be 150000*5 =750000(i.e., 3000000/20)
Carrying amount after 5 years willbe 3000000-750000=2250000
replacement value is higher of following (i.e., 1895000)
value in use= 3.79*500000=1895000
Fair value- disposal cost=1950000-150000=1800000
Therefore imapaired loss will be 2250000-1895000= 355000
4)correct entry will becredit revaluation surolus by 1000000
5)400000
6)
original cost =180000
accumalated depreciation=84000
(180000-84000)= 96000
FV= 60000
therefore 60000/3= 20000 will be depreciation