On January 1, 2018, Karen Company decided to sell a machinery with a cost of Php 6000,000
Question:
On January 1, 2018, Karen Company decided to sell a machinery with a cost of Php 6000,000 and an accumulated depreciation of Php 240,000. Depreciation of Php 5,000 per month has been provided by the company since it was acquired. The machinery will continue to be operated until sold. The company undertook all the necessary actions to be able to classify the asset as held for sale. On the same date, the fair value of the asset amounted to Php 310,000 while the cost to sell totals Php 10,000. On February 28, 2018, the plant had not been sold but there has been objective evidence that the fair value went up to Php 410,000. On July 1, 2018, the company sold the machinery for Php 620,000 after incurring selling cost of Php 20,000.
Required: Based on the above, answer the following:
- How much is the impairment loss to be recognized on January 1, 2018
- How much is the depreciation expense in 2018
- How much is the gain to be recognize in profit or loss in 2018 as a result of increase in the fair value of the asset
- How much is the net gain (loss) on sale of the assets in 2018?
- Assume instead that on the date of reclassification, the fair value less costs to sell amounted to Php 800,000 how much is the impairment loss to be recognized in 2018?
Advanced Accounting
ISBN: 978-1259444951
13th edition
Authors: Joe Ben Hoyle, Thomas Schaefer, Timothy Doupni