FIRST SEMESTER ASSIGNMENT WEEK 12. Impairment and Revaluation

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FIRST SEMESTER 2017 2018 ASSIGNMENT WEEK 12 Impairment and Revaluation Instruction: Please answer the question on a lined folio paper.

1 FIRST SEMESTER ASSIGNMENT WEEK 12 Impairment and Revaluation Instruction: Please answer the question on a lined folio paper. Don t forget to write down your identity (NAME, NRP, Lecturer class, and Assistant class). This assignment must be submitted at KAFEUS (intermediate accounting 1 lockers) on Wednesday, November 22 th before PM Assistant Class TYPE A, D Cookies B, E Sandwich C, F Bread Y Cake

TYPE : Cookies 1. On January 1 st, 2018, Peewee Inc. acquired two assets, Machine A and Machine B. Information on these assets is as follows: Cost Expected Useful Life Machine A $100,000.

2 TYPE : Cookies 1. On January 1 st, 2018, Peewee Inc. acquired two assets, Machine A and Machine B. Information on these assets is as follows: Cost Expected Useful Life Machine A $100, years Machine B $60, years The machines has no residual value and depreciated using the straight line method. Peewee Inc. chooses to use revaluation accounting for this machine. Information about the assets is as follows: Fair Value Machine A $84, $52, $49, Machine B $36, $34, $21, Prepare all the journal entries of the transaction above that related with machine B! 2. Presented below is information related to machine owned by Dragon Company Dec 31, 2017: Cost Rp Value in use Rp Fair value less cost to sell Rp The machine was bought at June 27, 2014 and has useful life for 8 years, no residual value, using SL method for the depreciation. a. Prepare the journal entry (if any) to record the impairment of the assets at Dec 31, 2017 b. Prepare the journal entry to record the depreciation expense for 2018 c. Assume that Dragon Company will continue to use this machine in the future. The recoverable amount of the equipment at December, is Rp Prepare the journal entry (if any) necessary to record this increase.

3 3. Paddington Inc. purchased Justice Company that Justice Company became a division in Paddington Inc. 2 years later, the division experienced operating losses. Paddington Inc. is reviewing the Justice Company for its impairment testing. The statement of financial position of Justice Company as follows: Justice Company Statement of Financial Position December 31, 2017 (in million) ASSETS LIABILITIES AND EQUITY Cash and cash equivalent $2.400 LIABILITIES Receivables $ Account payable $4.000 Inventory $5.500 Notes payable $3.000 Land $6.800 Equipment (net) $4.000 EQUITY Goodwill $3.100 Share capital ordinary $ Retained earnings $6.800 TOTAL ASSETS $ TOTAL LIABILITIES & EQUITY $ Prepare the journal entry to record the impairment (if any) in December 31, 2017 a. If the recoverable amount is $ b. If the recoverable amount is $ c. If the recoverable amount is $19.900

TYPE : Sandwich 1. Titi corporation was purchased by Susi company, which because a division of Susi. Over several months, the division experienced operating losses.

4 TYPE : Sandwich 1. Titi corporation was purchased by Susi company, which because a division of Susi. Over several months, the division experienced operating losses. Susi is reviewing the division for its impairment testing. The statement of financial position of Titi corporation as follow: Titi Corporation Statement of Financial Position As of December 31, 2017 (in thousand) Cash S Liabilities & Equity Inventory $ Account Payable $ Account Receivable $ Uneared revenue $ Allowance for doubtful $ 500 account Land $ Share capital ordinary $ Vehicle $ Retained Earning $ Goodwill $ Total Assets $ Total Liabilities & Equity $ Make journal entry to record the impairment (if any) in Dec 31, 2017 a. If the recoverable amount is $ b. If the recoverable amount is $ c. If the recoverable amount is $ Whiterose Company owns machine that purchased at a cost of Rp on January 7 th, The machine has 5 years useful life with no residual value and depreciated under double declining balance (DDB) method. Whiterose chooses to use revaluation accounting for this machine. The fair value of this machine on December 31 st 2017, 2018, 2019 are Rp , Rp , Rp Prepare all the journal entries of the transactions above!

5 3. Presented below is information related to equipment owned by Sweetcandy Company at December 31 st 2017 : - Cost Rp Value in Use Rp Fair Value less Cost of Disposal Rp This equipment was bought at the April 3 rd 2014 and has useful life for 8 years, no residual value, using straight line method for the depreciation. a. Prepare the journal entry (if any) to record the impairment of the assets at December 31 st 2017! b. Prepare the journal entry to record depreciation expense for 2017! c. Assume that Sweetcandy will continue to use this asset in the future. The recoverable amount of the equipment at December 31 st 2018 is Rp Prepare the journal entry (if any) necessary to record this increase!

1. Cocoa Corporation was purchased by Blueberry Company, which became a division of Blueberry. Over several months, the division experienced operating losses.

6 1. Cocoa Corporation was purchased by Blueberry Company, which became a division of Blueberry. Over several months, the division experienced operating losses. Blueberry is reviewing the division for its impairment testing. The statement of financial postion of Cocoa Corporation as follows : Cocoa Corporation STATEMENT OF FINANCIAL POSITION As of December 31, 2017 (in Million) Assets Equity & Liabilities Cash Rp 2,000 Account Payable Rp 27,200 Cash in Bank Rp 7,800 Notes Payable Rp 12,000 Inventory Rp 7,000 Receivable Rp 6,000 Share Capital Ordinary Rp 10,600 Building(net) Rp 15,000 Retained Earning Rp 11,000 Land Rp 19,000 Goodwill Rp 4,000 Total Assets Rp 60,800 Total Equity & Liabilities Rp 60,800 Make the journal entry to record the impairment (if any) in December 31 st 2017! a. If the recoverable amount of the division is Rp b. If the recoverable amount of the division is Rp c. If the recoverable amount of the division is Rp Presented below is information related to vehicle owned by Ulala Company at January 1 st, 2017 Cost Rp140,000, Value in Use Rp58,000, Fair Value Rp63,000,000.00

7 The vehicles was bought at December 31 th, 2013 and has useful life for 8 years with no residual value, depreciated using SL method. Cost to sell this vehicle was Rp6,500,000. a. Prepare the journal entry (if any) to record the impairment of the assets at December31 th, 2017! b. Prepare the journal entry to record the depreciation expense for 2018! c. Assume that Ulala will continue to use this asset in the future. The recoverable amount of the vehicle at December31 th, 2018 is Rp. 55,000,000,000. Prepare the journal entry (if any) necessary to record this increase! 3. Bello company owns warehouse that s purchase at a cost Rp on Januari 2, The building has 20 years useful life, no residual value and depreciated using straight line method. Bello choose to use revaluation accounting for this warehouse. The fair value of this warehouse on Dec 31, 2017, 2018,2019 are Rp , Rp , Rp

TYPE : Cake 1. Sullivan Company owns land at a cost of $26,000,000 that s purchased on February 22 nd, 2018. Sullivan Co choose to use revaluation method for valuating its land.

8 TYPE : Cake 1. Sullivan Company owns land at a cost of $26,000,000 that s purchased on February 22 nd, Sullivan Co choose to use revaluation method for valuating its land. The fair value of this land for December 31 st 2018, 2019, 2020 are known for $22,500,000; $30,000,000; $27,000,000. Please prepare all the journal entries required with the transaction above! 2. Wazowski Company bought the vehicle on January 7, The information is presented below on December 31, 2017: Cost Rp Acc. Depreciation... (useful life 10 years, no residual value, using straight-line method) Value in use Rp Fair value less cost of disposal Rp a. Prepare the journal entry (if any) to record the impairment of the vehicle on December 31, 2017 b. Prepare the journal entry for depreciation of the vehicle at 2018 c. Assume that Brown Company will continue to use this vehicle in the future. The recoverable amount of the vehicle at December 31, 2018 is Rp Prepare the journal entry (if any) to record this increase.

9 3. Angel Company, a Manufacturing company that produce chocolate snack purchase Blessing Corporation, which became a Biscuit division in Angel. Over several months, the division experienced operating losses. Angel is reviewing the division for its impairment testing. The statement of financial position of Blessing Corporation as follows: BLESSING CORP STATEMENT OF FINANCIAL POSITION As of December 31 th, 2018 (in Thousand) Cash $48, Cash in Bank $70, Account Payable $90, Inventory $62, Receivable $80, Equity and Liabilities Building $100, Share Capital Ordinary $70, Vehicles $25, Share Capital Preference $130, Equipment $35, Retained Earning $210, Goodwill $80, Total Assets $500, Total Equity and Liabilities $500, Make a journal entry to record the impairment (if any) in December 31 th, 2018! a. If recoverable amount of the division is $370,000,000 b. If recoverable amount of the division is $420,000,000 c. If recoverable amount of the division is $290,000,000

Step 2: Find out the value in use, which is the present value of future cash flow to be generated.

Step 2: Find out the value in use, which is the present value of future cash flow to be generated. How to Record Property, Plant and Equipment (Relevant to Paper 7 Financial Accounting) Dr. Kent Lee Background In accordance with HKAS 16, a company can choose either the cost model or revaluation model