Reference no: EM133149155
Question - On January 1, 2021, KOREA CORP. acquired a factory equipment at a cost of P450,000. The equipment is being depreciated using the straight-line method over its projected useful life of 10 years with P50,000 salvage value. On December 31, 2022, a determination was made that the future net cash flows expected from the continued use of the asset shall be P40,000 per year. Estimated salvage value remains to be P50,000. The asset also had a fair Page 5 of 7 value less cost to sell at P220,000 on the same date. You ascertained that this was properly computed and that recognition of the impairment was warranted. (The prevailing interest rate is 10%) On December 31, 2024, the asset's replacement cost was determined to be P555,000 with a total life of 12 years from date of acquisition. Salvage value is still estimated to be at P50,000. You also ascertained that this valuation is reasonable in the circumstance. You have been asked the company's accountant in the application of PAS 36, the standard on impairment of assets.
Required -
1. What is the recoverable value of the asset on December 31, 2022?
2. How much impairment loss should be recognized on December 31, 2022?
3. What is the asset's carrying amount on December 31, 2024?
4. How much impairment recovery should be reported in the 2024 income statement?
5. What is the depreciation expense in 2026, under the cost method?
6. What is the depreciation expense in 2026, under the revaluation method?
7. What is the balance of any revaluation surplus at the end of 2026, under piecemeal realization?
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