At the end of 2023, Swifty Corporation owns a licence with a carrying amount of $510,000. Swifty expects undiscounted future cashflows from this licence to total $515,600. The licence's fair value is $405,700 and disposal costs are estimated to be nil. The licence'sdiscounted cash flows (that is, value in use) are estimated to be $455,000. Assume that the licence was granted in perpetuity and hasan indefinite life, and that Swifty prepares financial statements in accordance with ASPE. Assume that the licence was granted inperpetuity and has an indefinite life.Determine if the licence is impaired at the end of 2023.The licence is impairedat the end of 2023.Prepare any related entry that is necessary. (Credit account titles are automatically indented when the amount is entered. Do not indentmanually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. List debit entry before credit entry.)Account Titles and ExplanationLoss on ImpairmentAccumulated Impairment Losses - LicenceseTextbook and MediaList of AccountsDebitCredit

According to the Accounting Standards for Private Enterprises (ASPE), an asset is considered…

Answered: At the end of 2023, Swifty Corporation…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Mala Prohibita Inc. is evaluating a proposal to acquire a new equipment. The equipment would require an investment of P417,860, including freight and installation cost of P40,000. It expected to have a 10- year life with no scrap value at the end of its life. It has been estimated that the new equipment would increase the company's cash inflows, net of expenses and income taxes by P68,000. The company can issue its 7% P1,000 par value bond to fund the project. The same type of bond is available in the market at P932.04836 per bond with interest payable semi-annually for ten years. The company is subject to 32% income tax. Determine the Cost of Capital (k) Using NPV and IRR method, give your recommendation if the company should push the project or not. Explain your answer.
For the next two questions, a "+" sign is optional for any answer that is a net cash inflow, but a "-" sign is mandatory for any answer that is a net cash outflow. Reebok Ltd is purchasing a $7.7 million machine, which will cost the firm an additional $46,000 to have the machine transported and installed ready for use. The machine is depreciated to a value of zero over a tax life of 4 years via the straight-line method. It will also be worthless in the salvage market at this time. The machine is expected to generate incremental revenues of $4.4 million per year for the firm while also causing incremental costs of $1.6 million per year. Reebok's marginal tax rate is 37.5%. You are forecasting incremental free cash flows for Reebok Ltd (a) What is the incremental free cash flow associated with the new machine at t=0? The free cash flow at t=0 will be $ (Round your answer to the nearest dollar) (b) What is the annual incremental free cash flows each year from t=1 to t=4? The annual free…
David Ltd commences operations on 1 July 2020 On the same date, it purchases a machine at a cost of $1000 000 The machine is expected to have a useful life of 4 years, with benefits being uniform throughout its life. It will have no residual value at the end of 4 years Hence, for accounting purposes the depreciation expense would be $250 000 per year For taxation purposes, the ATO allows the company to depreciate the asset over three years—that is, $200 000 per year The profit before tax of the company for each of the next four years (years ending 30 June) is $600 000, $700 000, $800 000 and $900 000 respectively The tax rate is 30 per cent. Required: 1. Calculate the taxable profit on 30 June 2021, 30 June 2022, 30 June 2023.2. Record the necessary journal entries.
Bangor Ltd operates under ideal conditions of uncertainty. On January 1, 2022, the company acquired an asset to be used in its operations. Its cash flows depend on the market conditions. The asset will last three years, at which time its salvage value will be £200. The company financed the asset purchase by issuing ordinary shares. In 2022, net cash flows will be £1600 if the market conditions are favourable and £700 if they are unfavourable. In 2023, cash flows will be £1800 if the market conditions are favourable, and £600 if they are unfavourable. In 2024, cash flows will be £2200 if the market conditions are favourable, and £900 if they are unfavourable. Cash flows are received at year-end. In 2022, the probability that the market conditions are favourable is 0.4 and 0.6 that they are unfavourable. In 2023 and 2024, the probability that the economic conditions are favourable is 0.7 and 0.3 that they are unfavourable. The interest rate in the economy is 9% in all three years. The…
Ac.
Protection Company develops a patent on a new fingerprint security technology. On January 1, 2018, this patent is registered for a cost of $30,000,000 for a period of 10 years. The company does not expect this technology to be obsolete over at least the next 15 years and intends to use it over this period. At the end of 2020, the fair value of the patent is $15,000,000. The discounted value of future cash flows (value-in-use) is $16,000,000. The Company adopts the cost model. 1. What will the cost of patent be? 2. What will the useful life be? Justify your answer. 3. Prepare the entries for 2018, 2019 and 2020. Please show the workings. Dont provide handwritten or image based answers thank you
At the end of 2020, Bonita Company is conducting an impairment test and needs to develop a fair value estimate for machinery used in its manufacturing operations. Given the nature of Bonita's production process, the equipment is for special use. (No secondhand market values are available.) The equipment will be obsolete in 2 years, and Bonita's accountants have developed the following cash flow information for the equipment. Year 2021 2022 2022 Net Cash Flow Estimate $5,440 9,500 $(460) 2,180 3,800 Scrap value $530 970 Probability Assessment 40% Click here to view factor tables 60% 20% 60% 20% 50% 50% Using expected cash flow and present value techniques, determine the fair value of the machinery at the end of 2020. Use a 6% discount rate. Assume all cash flows occur at the end of the year. (Round factor values to 5 decimal places, e.g. 1.25124 and final answer to O decimal places, e.g. 458,581.) Sair Fair value of the machinery at the end of 2020 $
Mala Prohibita Inc. is evaluating a proposal to acquire a new equipment. The equipment would require an investment of P417,860, including freight and installation cost of P40,000. It expected to have a 10- year life with no scrap value at the end of its life. It has been estimated that the new equipment would increase the company's cash inflows, net of expenses and income taxes by P68,000. The company can issue its 7% P1,000 par value bond to fund the project. The same type of bond is available in the market at P932.04836 per bond with interest payable semi-annually for ten years. The company is subject to 32% income tax. Determine the Cost of Capital (k) Using NPV and IRR method, give your recommendation if the company should push the project or not. Explain your answer.
An equipment of KAY Corporation was tested for impairment on December 31, 2019. The carrying value of the said equipment on that date is ₱4,800,000. The equipment can be sold for ₱4,500,000, and an estimate of ₱200,000 will be incurred for disposal. The cash flows that will be generated by the equipment for 2020, 2021, and 2022, are ₱2,000,000; ₱1,800,000; and ₱1,450,000, respectively. The appropriate discount rate is 11%. How much is the impairment loss? A. ₱ 300,000 B. ₱ 0 C. ₱ 500,000 D. ₱ 477,080
At the end of 2023, Blue Spruce Corporation owns a licence with a carrying amount of $505,000. Blue Spruce expects undiscounted future cash flows from this licence to total $509,100. The licence's fair value is $400,100 and disposal costs are estimated to be nil. The licence's discounted cash flows (that is, value in use) are estimated to be $447,400. Assume that the licence was granted in perpetuity and has an indefinite life, and that Blue Spruce prepares financial statements in accordance with ASPE. Assume that the licence was granted in perpetuity and has an indefinite life. Your answer is partially correct. Determine if the licence is impaired at the end of 2023. The licence is impaired at the end of 2023. Prepare any related entry that is necessary. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. List debit entry before credit…

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