Question
On January 1, 2018, Karen Company decided to sell a machinery with a cost of Php 1,200,000 and an accumulated depreciation of Php 480,000. Depreciation
On January 1, 2018, Karen Company decided to sell a machinery with a cost of Php 1,200,000 and an accumulated depreciation of Php 480,000. Depreciation of Php 10,000 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 620,000 while the cost to sell totals Php 20,000. On February 28, 2018, the plant had not been sold but there has been objective evidence that the fair value went up to Php 810,000. On July 1, 2018, the company sold the machinery for Php 800,000 after incurring selling cost of Php 50,000.
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?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started