FinAcc4 Quiz 2

On January 1, 2019, Terizla Company bought a factory equipment for P924,000, salvage value was estimated at P24,000. The asset will be depreciated over 10 years using the double declining balance method. How much is the total accumulated depreciation to be reported in the balance sheet on December 31, 2023?

• P 450,912

• P 545,530

• P 621,224

• P 681,779

Which of the following statements best describes “residual value”?

• The estimated net amount currently obtainable if the asset is at the end of its useful life.

• The present value of estimated future cash flows expected to arise from the continuing use of the asset and from its ultimate disposal.

• The amount at which the asset could be exchanged between knowledgeable and willing parties in an arm’s length transaction.

• The amount of cash or cash equivalents that could currently be obtained by selling the asset in an orderly disposal.

The useful life of an asset is

I. The period over which an asset is expected to be available for use by an entity.

II. The number of production of similar units expected to be obtained from the asset by an entity.

• I only

• II only

• Both I and II

• Neither I nor II

What is the treatment of the accumulated depreciation on the date of revaluation?

I. Restated proportionately with the change in the gross carrying amount of the asset so that the carrying amount after revaluation equals the revalued amount.

II. Eliminated against the gross carrying amount of the asset and the net amount restated to the revalued amount of the asset.

• I only

• II only

• Either I or II

• Neither I nor II

An impairment loss is the amount by which

• The carrying amount of an asset or cash generating unit exceeds its recoverable amount.

• The carrying amount of an asset or cash generating unit exceeds its value in use.

• The carrying amount of an asset or cash generating unit exceeds its fair value less cost to sell.

• The recoverable amount of an asset or cash generating unit exceeds its carrying amount.

The recoverable amount of an asset or cash generating unit is the

• Fair value less cost to sell

• Value in use

• Higher between fair value less cost to sell and value in use

• Lower between fair value less cost to sell and value in use

What is the allocation of an impairment loss recognized for a cash generating unit?

• Across the assets of the unit based on carrying amount.

• Across the assets of the unit based on fair value.

• First, to any goodwill, and the balance to the other assets on a prorata basis based fair value.

• First, to any goodwill, and the balance to the other assets on a prorata basis based on carrying amount.

For items within a class of property, plant and equipment with insignificant changes in fair value, revaluations are necessary only every

• Five years

• Ten years

• Three to five years

• Five to ten years

If an asset’s carrying amount is decreased as a result of revaluation, the decrease shall be

• Recognized in profit or loss after deducting any revaluation surplus previously recognized

• Debited directly to revaluation loss as component of other comprehensive income

• Retained Earnings

• Debited directly to equity under the heading unrealized loss.

The carrying amount of an item of property, plant and equipment shall be derecognized

I. On disposal

II. When no future economic benefits are expected from the use or disposal of the asset.

• I only

• II only

• Either I or II

• Neither I nor II