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How much is the balance of revaluation surplus on December

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Reference no: EM132847880

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Q1. On January 1, 2018, Maximoff Company purchases equipment with a list price of P10,000,000. The following were paid in connection with the purchase of equipment:

Freight and unloading charges- P200,000

Import duties- 300,000

Maximoff depreciates the equipment using the sum-of-the-years digit method with an estimated useful life of 10 years. Salvage value is expected at P200,000 at the end of its estimated useful life. Maximoff account for this asset using the revaluation model. At the end of 2019, an impairment testing showed that the fair value of the asset on this date was P7,000,000 with the cost to dispose of P350,000. While the net cash flows expected from continuing use of the asset is P1,351,215 annually at a 12% discount rate. The impairment indicators in 2019 did not persist in 2020, the recoverable amount of the asset on December 31, 2020, was at P6,200,000, but the company estimates that the remaining life of the asset on this date shall be 4 years only.

A. How much is the impairment loss recognized on profit or loss in 2019?

B. How much is the balance of revaluation surplus on December 31, 2021, assuming the company opted to use the piecemeal realization?

Q2. Miami Company purchased an equipment on January 2, 2018 for P2,000,000. The equipment is depreciated using straight line method, has an estimated useful life of 8 years and no salvage value. On December 31, 2019, the equipment has a fair value of P1,300,000 and estimated cost of disposal of P20,000. A net cash flow of P310,000 per year is expected from the asset from its continuing use. Applicable discount rate is 10%. (Round of PV Factor to 4 decimal places.)

On December 31, 2021, the equipment has a fair value of P1,100,000 and estimated cost of disposal of P50,000.

A. How much is the impairment loss for the year 2019?

B. How much is the gain on impairment reversal for 2021?

Reference no: EM132847880

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