Financial Accounting
3rd Edition
ISBN: 9780133791129
Author: Jane L. Reimers
Publisher: Pearson Higher Ed
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Chapter 6, Problem 13SEA
To determine
Explain the way impairment will affect the income statement at the time of recording.
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In 2022, Mao Li Corporation determined that a production machine used in its operations was impaired and an impairment loss of HK$110,000 was recognized. In 2023, the fair value of the asset increased by HK$170,000 due to an unexpected resurgence in demand for the products the machine was designed to produce. How would the gain due to increase in fair value be recognized in 2023 under IFRS?
Fiji Airways owns an aircraft worth 15350436 and accumulated depreciation of $5 million. The aircraft has a fair
value of $10,408,400. Due to the recent covid-19 crisis Fiji Airways is in a great need of cash to meet the daily
operational expenses, however it also needs the aircraft to conduct some repatriation flights and re-commence
normal flights when boarders re-open. Thus, Fiji Airways decides to sell the aircraft to Qantas at the fair value and
then immediately lease it back for the remaining useful life of 10 years. As per IFRS 16, this is a non-cancellable
finance lease. Fiji Airways will pay $2 million annually as lease repayment, commencing at the start of the 1st year.
Fiji Airways also guarantees the residual value to be $1.5 million at the end of the lease. (Assume an implicit
interest rate of 15%)
Assume you are preparing the journal entries in the books of the lessee, what amount you will debit the deferred
gain by in the first year?
O a, 494204
O b, -5796
O c. -57964
d.…
Tamarisk Inc. owns equipment that cost $ 638,000 and has accumulated depreciation of $ 165,000. The expected future net cash flows
from the use of the asset are expected to be $ 422,000. The fair value of the equipment is $ 365,000.
Prepare the journal entry, if any, to record the impairment loss. (If no entry is required, select "No Entry" for the account titles and enter O for
the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)
Account Titles and Explanation
Debit
Credit
Chapter 6 Solutions
Financial Accounting
Ch. 6 - For each of the following costs, indicate whether...Ch. 6 - Prob. 2YTCh. 6 - For each of the following, give the term for...Ch. 6 - On January 1, 2010, Access Company purchased a new...Ch. 6 - Prob. 5YTCh. 6 - An asset costs 50,000, has an estimated salvage...Ch. 6 - Prob. 7YTCh. 6 - Prob. 8YTCh. 6 - Prob. 1QCh. 6 - What is the difference between capitalizing and...
Ch. 6 - Prob. 3QCh. 6 - What does amortization mean?Ch. 6 - Prob. 5QCh. 6 - Prob. 6QCh. 6 - Prob. 7QCh. 6 - Prob. 8QCh. 6 - What is the residual value, or salvage value, of...Ch. 6 - What is the difference between depreciation...Ch. 6 - Prob. 11QCh. 6 - Explain the difference between the three...Ch. 6 - Prob. 13QCh. 6 - Prob. 14QCh. 6 - Prob. 15QCh. 6 - What types of costs related to long-term...Ch. 6 - How is a gain or loss on the disposal of an asset...Ch. 6 - How does goodwill arise?Ch. 6 - Prob. 19QCh. 6 - Prob. 20QCh. 6 - Prob. 21QCh. 6 - Prob. 1MCQCh. 6 - Prob. 2MCQCh. 6 - Prob. 3MCQCh. 6 - Prob. 4MCQCh. 6 - Prob. 5MCQCh. 6 - Prob. 6MCQCh. 6 - Prob. 7MCQCh. 6 - Prob. 8MCQCh. 6 - Prob. 9MCQCh. 6 - Prob. 10MCQCh. 6 - Prob. 1SEACh. 6 - Prob. 2SEACh. 6 - Prob. 3SEACh. 6 - Prob. 4SEACh. 6 - Prob. 5SEACh. 6 - Calculate depreciation expense: double-declining...Ch. 6 - Prob. 7SEACh. 6 - Prob. 8SEACh. 6 - Mining Expedition Company purchased a coal mine on...Ch. 6 - Unique Quality Recourses purchased a patent for...Ch. 6 - Analyze revenue and capital expenditures. (LO 4)....Ch. 6 - On January 1, 2010, the Premium Beer Corporation...Ch. 6 - Prob. 13SEACh. 6 - Prob. 14SEACh. 6 - Prob. 15SEBCh. 6 - Prob. 16SEBCh. 6 - Prob. 17SEBCh. 6 - Prob. 18SEBCh. 6 - Prob. 19SEBCh. 6 - Calculate depreciation expense: double-declining...Ch. 6 - Prob. 21SEBCh. 6 - Prob. 22SEBCh. 6 - Prob. 23SEBCh. 6 - Prob. 24SEBCh. 6 - Prob. 25SEBCh. 6 - Prob. 26SEBCh. 6 - Prob. 27SEBCh. 6 - Prob. 28SEBCh. 6 - Prob. 29EACh. 6 - Prob. 30EACh. 6 - Prob. 31EACh. 6 - Prob. 32EACh. 6 - Calculate depreciation under alternative methods....Ch. 6 - Soda Pop Bottling Company bought equipment for...Ch. 6 - Prob. 35EACh. 6 - Prob. 36EACh. 6 - Prob. 37EACh. 6 - Prob. 38EACh. 6 - Prob. 39EACh. 6 - Prob. 40EACh. 6 - Prob. 41EACh. 6 - Prob. 42EACh. 6 - Prob. 43EACh. 6 - Prob. 44EACh. 6 - Prob. 45EACh. 6 - Big Peach Athletics sold assets with an original...Ch. 6 - Prob. 47EACh. 6 - Prob. 48EACh. 6 - Prob. 49EBCh. 6 - Prob. 50EBCh. 6 - Prob. 51EBCh. 6 - Prob. 52EBCh. 6 - Calculate depreciation under alternative methods....Ch. 6 - Pristine Carpet Cleaner bought a new steamer for...Ch. 6 - Prob. 55EBCh. 6 - Prob. 56EBCh. 6 - Prob. 57EBCh. 6 - Prob. 58EBCh. 6 - Prob. 59EBCh. 6 - Prob. 60EBCh. 6 - Prob. 61EBCh. 6 - Prob. 62EBCh. 6 - Prob. 63EBCh. 6 - Prob. 64EBCh. 6 - Prob. 65EBCh. 6 - Prob. 66EBCh. 6 - Prob. 67EBCh. 6 - Prob. 68EBCh. 6 - Prob. 69PACh. 6 - Prob. 70PACh. 6 - Prob. 71PACh. 6 - Prob. 72PACh. 6 - Prob. 73PACh. 6 - Prob. 74PACh. 6 - Prob. 75PACh. 6 - Prob. 76PACh. 6 - Prob. 77PACh. 6 - Prob. 78PACh. 6 - Prob. 79PBCh. 6 - Prob. 80PBCh. 6 - Prob. 81PBCh. 6 - Prob. 82PBCh. 6 - Prob. 83PBCh. 6 - Prob. 84PBCh. 6 - Prob. 85PBCh. 6 - Elite Cleaners bought a new machine on January 1,...Ch. 6 - Prob. 87PBCh. 6 - Prob. 88PBCh. 6 - Prob. 1FSACh. 6 - Prob. 2FSACh. 6 - Prob. 1CTPCh. 6 - Prob. 2CTPCh. 6 - Prob. 3CTPCh. 6 - Prob. 1IECh. 6 - Prob. 2IECh. 6 - Prob. 3IE
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- Toro Co. has equipment with a carrying amount of $700,000. The value-in-use of the equipment is $705,000, and its fair value less costs of disposal is $590,000. The equipment is expected to be used in operations in the future. What amount (if any) should Toro report as an impairment to its equipment?arrow_forwardSplish Brothers Inc. owns equipment that cost $627,000 and has accumulated depreciation of $162,000. The expected future net cash flows from the use of the asset are expected to be $414,000. The fair value of the equipment is $358,000.Prepare the journal entry, if any, to record the impairment loss. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.) Account Titles and Explanation Debit Credit enter an account title enter a debit amount enter a credit amount enter an account title enter a debit amount enter a credit amountarrow_forwardSage Hill Inc. owns equipment that cost $594,000 and has accumulated depreciation of $154,000. The expected future net cash flows from the use of the asset are expected to be $392,000. The fair value of the equipment is $339,000. Prepare the journal entry, if any, to record the impairment loss. (If no entry is required, select "No Entry" for the account titles and enter O for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.) Account Titles and Explanation Debit Creditarrow_forward
- Windsor Company owns equipment that cost $972,000 and has accumulated depreciation of $410,400. The expected future net cash flows from the use of the asset are expected to be $540,000. The fair value of the equipment is $432,000.Prepare the journal entry, if any, to record the impairment loss. (If no entry is required, select "No entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.) Account Titles and Explanation Debit Credit enter an account title enter a debit amount enter a credit amount enter an account title enter a debit amount enter a credit amountarrow_forwardAfter recording depreciation for the current year, Media Mania Incorporated decided to discontinue using its printing equipment. The equipment had cost $748,000, accumulated depreciation was $547,000, and its fair value (based on estimated future cash flows from selling the equipment) was $48,000. Determine whether the equipment is impaired. Prepare the journal entries to record the impairment in asset if any. Fill in the blank : The fair value is ________ and the book value is ___________ , therefore this asset (is/is not) impaired Record journal entry to remove accumulated depreciation Record journal entry for the impairment lossarrow_forwardIn 2022, Mao Li Corporation determined that a production machine used in its operations was impaired and an impairment loss of HK$110,000 was recognized. In 2023, the fair value of the asset increased by HK$170,000 due to an unexpected resurgence in demand for the products the machine was designed to produce. How would the gain due to increase in fair value be recognized in 2023 under IFRS? Group of answer choices IFRS does not permit recognition of gains on reversal of previous impairment loss write-downs. IFRS allows the recognition of this impairment reversal as either income from continuing operations or as other comprehensive income, depending upon management's intent. IFRS permits the recognition of this impairment reversal as income from continuing operations. IFRS permits the recognition of this impairment reversal as other comprehensive income.arrow_forward
- In 2022, Mao Li Corporation determined that a production machine used in its operations was impaired and an impairment loss of HK$110,000 was recognized. In 2023, the fair value of the asset increased by HK$170,000 due to an unexpected resurgence in demand for the products the machine was designed to produce. How would the gain due to increase in fair value be recognized in 2023 under IFRS? Group of answer choices IFRS allows the recognition of this impairment reversal as either income from continuing operations or as other comprehensive income, depending upon management's intent. IFRS permits the recognition of this impairment reversal as income from continuing operations. IFRS does not permit recognition of gains on reversal of previous impairment loss write-downs. IFRS permits the recognition of this impairment reversal as other comprehensive income.arrow_forwardAs a result of an allegedly defective equipment causing harm to an employee, an entity is facing a lawsuit requesting damages. The entity's legal counsel estimates that there is an approximately 60% possibility that the entity will lose the case and that it will have to pay an amount between $100,000 and $200,000 with no amount within such range being more likely than any other amount in the range. How much should the entity record as a contingent loss, if any? (Select the best answer.) a. O $0 b. $60,000 c. O $100,000 d. O $150,000arrow_forwardWilson Corporation is performing the test of impairment of its Technology reporting unit at the end of the year. Wilson has determined the fair value of the unit using a multiple of earnings approach at $2,000,000. The carrying value of the net assets of the Technology unit is $2,100,000. What should Wilson do with this information? a) Record an impairment loss of $100,000. b) Record no impairment loss. c) Perform step 2 of the test of impairment. d) Value goodwill individually.arrow_forward
- Martinez Company owns equipment that cost $1,053,000 and has accumulated depreciation of $444,600. The expected future net cash flows from the use of the asset are expected to be $585,000. The fair value of the equipment is $468,000.Prepare the journal entry, if any, to record the impairment loss. (If no entry is required, select "No entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.) Account Titles and Explanation Debit Creditarrow_forwardSwifty Company owns equipment that cost $927,000 and has accumulated depreciation of $391,400. The expected future net cash flows from the use of the asset are expected to be $565,000. The fair value of the equipment is $412,000. Prepare the journal entry, if any, to record the impairment loss. (If no entry is required, select "No entry" for the account titles and enter O for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually. List debit entry before credit entry.) Account Titles and Explanation Loss on Impairment Accumulated Depreciation - Equipment Debit 123600 Credit 123600arrow_forwardMetlock, Inc. disposes of an unprofitable segment of its business. The operation of the segment suffered a S215000 loss in the year of disposal. The loss on disposal of the segment was $115000. If the tax rate is 319%, and income before income taxes was $1615000, a the income tax expense on the income before discontinued operations is $432300. b. the income from continuing operations is $1114350. c. the losses from discontinued operations are reported net of income taxes at $330000. d. net income is $1285000.arrow_forward
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