Intermediate Accounting
3rd Edition
ISBN: 9780136912644
Author: Elizabeth A. Gordon; Jana S. Raedy; Alexander J. Sannella
Publisher: Pearson Education (US)
expand_more
expand_more
format_list_bulleted
Videos
Textbook Question
Chapter 12, Problem 12.6P
Tangible Asset Impairment, Potential Reversal, IFRS. Use the same information from P12-1 with three modifications.
- Chrispian Cookies Inc is an IFRS reporter.
- Similar baking equipment could be sold for $5,100,000.
- Chrispian estimates that costs to sell the baking equipment are $5,000.
Required
- a. Conduct an impairment test for Chnspian s baking equipment.
- b. Prepare the
journal entry to record any impairment loss indicated. - c. Compute the amount of the revised depreciation expense at the end of the next year. Assume that management now estimates that there will be no residual value at the end of the asset's life.
- d. Prepare any journal entry necessary if the estimated fair value less costs to sell at the end of the next year is $5,400,000 and its value in use is $4,900,000.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
ABC Corporation is a company that specializes in (1) research and
development of new medications and (2) acquisition of patents for new
medications. ABC follows IFRS accounting standards. In ABC's situation,
which of the following statements about the treatment of intangible
assets is correct?
Intangible assets with indefinite lives must be amortized annually.
Intangible assets must be measured using the cost model
Research and development costs are expensed as incurred, except for software
development.
O Intangible assets may be revalued to fair value if there is an active market for
the asset
After first recording any impairment losses on plant and equipment and the patent.
Required:
1. Compute the book value of the plant and equipment and patent at the end of 2024.
2. When should the plant and equipment and the patent be tested for impairment?
3. When should goodwill be tested for impairment?
4. Determine the amount of any impairment loss to be recorded, if any, for the three assets.
Complete this question by entering your answers in the tabs below.
Required 1 Required 2
Required 3
Required 4
Compute the book value of the plant and equipment and patent at the end of 2024.
Note: Enter your answers in millions rounded to 1 decimal place. For example, $5,500,000 should be entered as $5.5.
Plant and equipment
Book Value
million
Patent
million
1. Which of the following is a qualifying asset? *
A. Building that is ready for its intended use upon purchase
B. An application software (intangible asset) that takes 3 years to develop
C. Investment property measured at fair value
D. Inventories that are routinely produced in large quantities in continuous basis
2. In which of the following instances is the capitalization of borrowing costs under PAS 23 would most likely be suspended? *
A. Construction is temporarily stopped for the curing of concrete.
B. Active development is stopped to give time for the engineers to reevaluate a design flaw.
C. The construction of a bridge is disrupted by troubled waters.
D. The construction of a building is discontinued because it is condemned by the government. The resumption of development is uncertain.
3. On January 1, 20x1, Entity A obtained a 12% ₱6,000,000 loan, specifically to finance the construction of a building. The proceeds of the…
Chapter 12 Solutions
Intermediate Accounting
Ch. 12 - Prob. 12.1QCh. 12 - Can firms group all property, plant, and equipment...Ch. 12 - Prob. 12.3QCh. 12 - Prob. 12.4QCh. 12 - Do firms follow the same steps for impairment...Ch. 12 - Prob. 12.6QCh. 12 - Prob. 12.7QCh. 12 - Prob. 12.8QCh. 12 - Under IFRS, if a firm recovers an impairment loss...Ch. 12 - Under IFRS, when do firms test plant assets and...
Ch. 12 - Prob. 12.11QCh. 12 - Prob. 12.12QCh. 12 - Prob. 12.1MCCh. 12 - Prob. 12.2MCCh. 12 - Prob. 12.3MCCh. 12 - Prob. 12.4MCCh. 12 - Prob. 12.5MCCh. 12 - Prob. 12.6MCCh. 12 - Prob. 12.1BECh. 12 - Prob. 12.2BECh. 12 - Prob. 12.3BECh. 12 - Prob. 12.4BECh. 12 - Indefinite-Life Intangible Asset Impairment....Ch. 12 - Prob. 12.6BECh. 12 - Prob. 12.7BECh. 12 - Prob. 12.8BECh. 12 - Prob. 12.9BECh. 12 - Prob. 12.10BECh. 12 - Prob. 12.11BECh. 12 - Prob. 12.12BECh. 12 - Prob. 12.13BECh. 12 - Prob. 12.14BECh. 12 - Prob. 12.15BECh. 12 - Prob. 12.16BECh. 12 - Prob. 12.17BECh. 12 - Prob. 12.18BECh. 12 - Prob. 12.19BECh. 12 - Prob. 12.20BECh. 12 - Prob. 12.21BECh. 12 - Prob. 12.22BECh. 12 - Prob. 12.23BECh. 12 - Tangible Asset Impairment. Henne Optical...Ch. 12 - Tangible Asset Impairment Loss. Use the same...Ch. 12 - Prob. 12.3ECh. 12 - Prob. 12.4ECh. 12 - Prob. 12.5ECh. 12 - Tangible Asset Impairment Loss, IFRS. Use the same...Ch. 12 - Prob. 12.7ECh. 12 - Prob. 12.8ECh. 12 - Prob. 12.9ECh. 12 - Assets Held for Disposal. Hattie Corporation...Ch. 12 - Prob. 12.11ECh. 12 - Asset Revaluation, Downwards, IFRS. Lousa Company...Ch. 12 - Tangible Asset Impairment. Chrispian Cookies, Inc....Ch. 12 - Prob. 12.2PCh. 12 - Tangible Asset Impairment. Using the same...Ch. 12 - Prob. 12.4PCh. 12 - Goodwill Impairment, Tangible Fixed Assets, and...Ch. 12 - Tangible Asset Impairment, Potential Reversal,...Ch. 12 - Prob. 12.7PCh. 12 - Prob. 12.8PCh. 12 - Prob. 12.9PCh. 12 - Comprehensive Asset Revaluation Problem (Initial...Ch. 12 - Prob. 12.11PCh. 12 - Judgment Case 1: Impairments of PPE under IFRS...Ch. 12 - Prob. 2JCCh. 12 - Prob. 3JCCh. 12 - Financial Statement Analysis Case 1: Long-Lived...Ch. 12 - Surfing the Standards Case 1: Impairments of PPE...Ch. 12 - Prob. 2SSCCh. 12 - Prob. 1BCCCh. 12 - Basis for Conclusions Case 2: Intangible Assets ...Ch. 12 - Basis for Conclusions Case 3: Goodwill Impairment...
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.Similar questions
- Required information [The following information applies to the questions displayed below.) At the beginning of the year, Cruz & Turner Corporation bought three used machines. The machines immediately were overhauled, were installed, and started operating. Because the machines were different, each was recorded separately in the accounts. Details for Machine A are provided below. Cost of the asset Installation costs Renovation costs prior to use Repairs after production began $10,700 970 1,110 850 Required: 1. Compute the amount to be capitalized for Machine A Total cost Uarrow_forwardRequired information [The following information applies to the questions displayed below.] Freeman Landscaping purchased a tractor at a cost of $37,000 and sold it three years later for $18,800. Freeman recorded depreciation using the straight-line method, a five-year service life, and a $2,500 residual value. Tractors are included in the Equipment account. Required: Record the sale. (If no entry is required for a particular transaction/event, select "No Journal Entry Required" in the first account field.) Journal entry worksheet 1 Record the sale of tractor. Note: Enter debits before credits. \table[[Transaction,General Journal,Deblt,Credit],[1,,,],[,,,],[,,,],[,,,],[,,,],[,,,]]arrow_forwardAbbott Landscaping purchased a tractor at a cost of $25,000 and sold it three years later for $13,400. Abbott recorded depreciation using the straight-line method, a five-year service life, and a $3,500 residual value. Tractors are included in the Equipment account. Required: 1. Record the sale. (If no entry is required for a particular transaction/event, select "No Journal Entry Required" in the first account Field.) View transaction list Journal entry worksheet 1 > Record the sale of equipment. Note: Enter debits before credits. Transaction General Journal Debit Credit 1 Cash Accumulated Depreciation Loss Equipmentarrow_forward
- Help Save Required information Enter your search term E8-4 (Algo) Determining Financial Statement Effects of an Asset Acquisition and Depreciation (Straight- Line Depreciation) LO8-2, 8-3 [The following information applies to the questions displayed below.] During Year 1, Ashkar Company ordered a machine on January 1 at an invoice price of $23,000. On the date of delivery, January 2, the company paid $6,000 on the machine, with the balance on credit at 9 percent interest due in six months. On January 3, it paid $600 for freight on the machine. On January 5, Ashkar paid installation costs relating to the machine amounting to $2,800. On July 1, the company paid the balance due on the machine plus the interest. On December 31 (the end of the accounting period), Ashkar recorded depreciation on the machine using the straight-line method with an estimated useful life of 10 years and an estimated residual value of $4,200. E8-4 Part 2 2. Compute the acquisition cost of the machine. Acquisition…arrow_forwardvork my work mode: This shows what is correct or incorrect for the work you have completed so far. It does not indicate completion Cost of the asset Installation costs Renovation costs prior to use Repairs after production began Required information PA9-1 (Algo) Computing Acquisition Cost and Recording Depreciation under Three Alternative Methods [LO 9-2, LO 9-3] [The following information applies to the questions displayed below.] Saved At the beginning of the year, Buffalo Machinery bought three used machines. The machines immediately were overhauled, were installed, and started operating. Because the machines were different, each was recorded separately in the accounts. Details for Machine A are provided below. H 0,90 Return to aarrow_forwardThe translation may be awkward. Please tell me the detailed explanation and answer.Please tell me how the answer process comes out. 1. Double-declining-balance methodOn January 1, 2018, Company A purchased one mechanical device. The acquisition cost of machinery is 800,000, and the content training is 8 years. The double-declining-balance method is applied separately when the residual value of the machine is 300,000 and 100,000, and the depreciation cost of the machine in 2020, 2021 and 2022 is calculated and depreciated. If there is a difference, please explain why. (Round to the nearest whole number when calculating depreciation.) 2, depreciation / sum-of-the-years'-digits methodOn October 1, Company A paid 1,600,000,000 cash and purchased the building. It is estimated that this building can be used for 5 years. The estimated residual value of the building is 100,000,000. If you use the sum-of-the-years'-digits method, calculate the depreciation of the building on your statement of…arrow_forward
- ! Required information [The following information applies to the questions displayed below.] At the beginning of the year, Almond Factory bought three used machines. The machines immediately were overhauled, were installed, and started operating. Because the machines were different, each was recorded separately in the accounts. Details for Machine A are provided below. Cost of the asset Installation costs Renovation costs prior to use Repairs after production began $10,400 940 1,020 790 7. Prepare the journal entry to record year 2 double-declining balance depreciation expense for Machine C, which has a cost of $26,800, an estimated life of 10 years, and $1,400 residual value. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.) A. Record the year 2 depreciation expense for Machine C.arrow_forwardRequired information [The following information applies to the questions displayed below.] At the beginning of the year, Almond Factory bought three used machines. The machines immediately were overhauled, were installed, and started operating. Because the machines were different, each was recorded separately in the accounts. Details for Machine A are provided below. Cost of the asset Installation costs Renovation costs prior to use Repairs after production began $10,400 940 1,020 790 Prepare the journal entry to record year 2 units-of-production depreciation expense for Machine B, assuming a capitalized cost of $47,880, an estimated life of 30,000 hours, $4,500 residual value, and actual year 2 use of 8,000 hours. (Do not round intermediate calculations. If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.) Record the year 2 depreciation expense for Machine B.arrow_forwardRequirements a. Prepare the journal entry required to record the impairment loss. b. Assuming that Lewad's uses the straight-line method with no residual value, prepare the journal entry to record the revised depreciation expense for the first year immediately following the impairment. c. Assume that 2 years following the impairment write-down, the fair value of the asset falls to $729,000. The sum of the undiscounted future cash flows is $755,000. What is the carrying value of the asset at this time? Prepare any journal entry necessary to reflect the change in fair value Print Done - xarrow_forward
- Consider the information provided below and then complete the journals below that reflects the entry for the recognition of the construction costs of the property, plant and equipment and the expense as the asset is used. For this question assume the cost of constructing the plant is R900 000 (Select the correct value/entry for each block (letter) by selecting them from the dropdown lists provided.) BBA (PTY) Limited constructed the plant at a cost of R900 000 and the plant has a useful life of 20 years. The financial year of the entity ends on 31 December 2021. The construction of the plant was completed on 30 June 2021. It was available for use on the same day and brought into use on 30 September 2021. The residual value of the plant was estimated at R100 000. Complete the journal entries by filling in the correct information from the drop down menu: Debit (R) Credit (R) date: Factory plant Property, plant and equipment…arrow_forwardAdama Company incurred the following costs.Indicate to which account Adama would debit each of the costs. 1. Sales tax on factory machinery purchased $ 5,000 Select the account to be debited Land ImprovementsLandPrepaid InsuranceBuildingEquipment 2. Painting of and lettering on truck immediately upon purchase 700 Select the account to be debited Prepaid InsuranceBuildingLand ImprovementsLandEquipment 3. Installation and testing of factory machinery 2,000 Select the account to be debited Prepaid InsuranceBuildingLandEquipmentLand Improvements 4. Real estate broker’s commission on land purchased 3,500 Select the account to be debited Prepaid InsuranceBuildingLandEquipmentLand Improvements 5. Insurance premium paid for first year’s insurance on new truck 880 Select the account to be debited EquipmentPrepaid InsuranceLand ImprovementsBuildingLand 6. Cost of landscaping on property purchased 7,200 Select the…arrow_forwardDon Williams is General manager of Carib Systems who received a proposal to replace theVersion 1 with Version 2 Point of Sales (POS) equipment at the company. Williams collectsdata about the proposal on Version 1 and Version 2 as follows:Version 1 POS Version 2 POSOriginal cost $425,000 $170,000Useful life 5 years 3 yearsCurrent age 2 years 0 yearsRemaining useful life 3 years 3 yearsAccumulated depreciation $195,000 Not purchased yetCurrent book value $230,000 Not purchased yetCurrent disposal value (in cash) $120,000 Not purchased yetFinal disposal value (in cash 3 years from now) $0 $0Annual POS cash operating costs $60,000 $20,000Annual revenues $1,250,000 $1,250,000Annual non POS related operating costs $920,000 $920,000Required:As the Management Accountant:1. Compare the costs of Version 1 POS and Version 2 POS. Consider the cumulative resultsfor the three years together, ignoring the time value of money and income taxes.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Cornerstones of Financial AccountingAccountingISBN:9781337690881Author:Jay Rich, Jeff JonesPublisher:Cengage Learning
Cornerstones of Financial Accounting
Accounting
ISBN:9781337690881
Author:Jay Rich, Jeff Jones
Publisher:Cengage Learning
Asset impairment explained; Author: The Finance Storyteller;https://www.youtube.com/watch?v=lWMDdtHF4ZU;License: Standard Youtube License