The R Company acquired an equipment on January 1, 2016 at a cost of P900,000, depreciating it over 8 years with a nil residual value. On January 1, 2019 the M Company acquired 100% of R and estimated the fair value of the equipment at P520,000, with a remaining life of 5 years. This fair value was not incorporated into R’s books and the depreciation expense continued to be calculated by reference to original cost. What adjustments should be made to the carrying amount of equipment in preparing the consolidated statements of financial position for the year ended December 31, 2020? Increase or decrease? *

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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The R Company acquired an equipment on January 1, 2016 at a cost of P900,000, depreciating it over 8 years with a nil residual value. On January 1, 2019 the M Company acquired 100% of R and estimated the fair value of the equipment at P520,000, with a remaining life of 5 years. This fair value was not incorporated into R’s books and the depreciation expense continued to be calculated by reference to original cost. What adjustments should be made to the carrying amount of equipment in preparing the consolidated statements of financial position for the year ended December 31, 2020? Increase or decrease? *
a. P42,500 increase
b. P17,000 decrease
c. P25,500 decrease
d. P42,500 decrease

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