Mr. Wonder purchased a machine amounting to P7,000,000 on January 1, 2013 providing the newest kind of technology to improve their operations. It has a useful life of 20 years and a salvage value of P500,000. However, on June 30, 2018, they decided to dispose it to liquidate some of its debts. Therefore, they classified it as held for sale. The fair value of the machine on that date P5,100,000 and the cost of disposal is P100,000. On November 30, 2019, the company decided again to continue to use it since they were able to obtain funding from their investors through follow-on offering of additional shares to pay their currently maturing obligations. On this date, the fair value of the machine is P4,900,000 and the cost of disposal is P50,000. How much is the gain or loss in the reclassification in 2019?
Mr. Wonder purchased a machine amounting to P7,000,000 on January 1, 2013 providing the newest kind of technology to improve their operations. It has a useful life of 20 years and a salvage value of P500,000. However, on June 30, 2018, they decided to dispose it to liquidate some of its debts. Therefore, they classified it as held for sale. The fair value of the machine on that date P5,100,000 and the cost of disposal is P100,000. On November 30, 2019, the company decided again to continue to use it since they were able to obtain funding from their investors through follow-on offering of additional shares to pay their currently maturing obligations. On this date, the fair value of the machine is P4,900,000 and the cost of disposal is P50,000. How much is the gain or loss in the reclassification in 2019?
Chapter14: Property Transactions: Capital Gains And Losses, § 1231, And Recapture Provisions
Section: Chapter Questions
Problem 75P
Related questions
Question
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 4 steps with 2 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Principles of Accounting Volume 1
Accounting
ISBN:
9781947172685
Author:
OpenStax
Publisher:
OpenStax College
Principles of Accounting Volume 1
Accounting
ISBN:
9781947172685
Author:
OpenStax
Publisher:
OpenStax College