Far 1 - Final Examinations

Approved & Edited by ProProfs Editorial Team
The editorial team at ProProfs Quizzes consists of a select group of subject experts, trivia writers, and quiz masters who have authored over 10,000 quizzes taken by more than 100 million users. This team includes our in-house seasoned quiz moderators and subject matter experts. Our editorial experts, spread across the world, are rigorously trained using our comprehensive guidelines to ensure that you receive the highest quality quizzes.
Learn about Our Editorial Process
| By JOSEPH PAUL
J
JOSEPH PAUL
Community Contributor
Quizzes Created: 1 | Total Attempts: 1,712
Questions: 20 | Attempts: 1,712

SettingsSettingsSettings
Far 1 - Final Examinations - Quiz


Questions and Answers
  • 1. 

    HAVANA Company provided the following calculation about an impairment loss recognized on December 31, 2017:                                 Goodwill            Other assets Carrying amount      3,000,000              9,000,000 Impairment loss        3,000,000             2,000,000 There has been a favorable change in the estimate of the recoverable amount of the net assets since the impairment loss was recognized. The recoverable amount is now P8,000,000 on December 31, 2018. The carrying amount of the new assets of would have been P7,200,000 on December 31, 2018. Assets are depreciated at 20% of reducing balance. What amount should be recognized as gain on reversal of impairment for 2018?

    • A.

      1,000,000

    • B.

      2,400,000

    • C.

      1,600,000

    • D.

      0

    Correct Answer
    C. 1,600,000
    Explanation
    The gain on reversal of impairment for 2018 should be P1,600,000. This is calculated by subtracting the carrying amount of the new assets on December 31, 2018 (P7,200,000) from the recoverable amount on December 31, 2018 (P8,000,000). The difference between the two amounts represents the gain on reversal of impairment. Therefore, P8,000,000 - P7,200,000 = P1,600,000.

    Rate this question:

  • 2. 

    PAS 1 is

    • A.

      Conceptual Framework for Financial Reporting

    • B.

      Preparation of Financial Statements

    • C.

      Presentation of Financial Statements

    • D.

      Preparation and Presentation of Financial Statements

    Correct Answer
    C. Presentation of Financial Statements
    Explanation
    The correct answer is "Presentation of Financial Statements." PAS 1, or the International Accounting Standard (IAS) 1, is a standard that provides guidance on the presentation of financial statements. It outlines the minimum requirements for the content and format of financial statements, including the balance sheet, income statement, cash flow statement, and statement of changes in equity. This standard ensures that financial statements are presented in a consistent and transparent manner, allowing users to understand and analyze the financial performance and position of an entity.

    Rate this question:

  • 3. 

    During 2016, the first year of operations, R Company purchased the following equity securities:                                                     Cost                                Market value                        Market value                                                                                     December 31, 2016            December 31, 2017 Security 1                            2,200,000                              1,400,000                              900,000 Security 2                            700,000                                 1,000,000                            1,100,000 Security 3                          1,600,000                               1,500,000                             1,600,000         Security 4                          2,000,000                               2,500,000                             1,200,000 Security 1 and Security 2 are held for trading and Security 3 and Security 4 are measured as at fair value through other comprehensive income by election. During 2017, the entity sold one-half of Security 1 for P1,000,000, and one-half of Security 4 for P1,300,000. What is the unrealized gain or unrealized loss – FVOCI to be recorded on December 31, 2017?

    • A.

      50,000 unrealized gain

    • B.

      50,000 unrealized loss

    • C.

      100,000 unrealized gain

    • D.

      100,000 unrealized loss

    Correct Answer
    A. 50,000 unrealized gain
    Explanation
    The unrealized gain or loss for securities measured at fair value through other comprehensive income (FVOCI) is calculated by comparing the market value at the end of the reporting period (December 31, 2017) with the fair value at the beginning of the reporting period. In this case, Security 3 had a market value of 1,600,000 at the end of the reporting period, which is higher than its fair value of 1,500,000 at the beginning of the reporting period, resulting in a 50,000 unrealized gain.

    Rate this question:

  • 4. 

    At the beginning of current year, M Company purchased 40% of the outstanding ordinary shares of an investee paying P2,560,000 when the carrying amount of the net assets of the investee equalled P5,000,000. The difference was attributed to equipment which had a carrying amount of P1,200,000 and a fair market value of P2,000,000, and to building with a carrying amount of P1,000,000 and a fair market value of P1,600,000. The remaining useful life of the equipment and building was 4 years and 12 years, respectively. During the current year, the investee reported net income of P1,600,000 and paid dividends of P1,000,000. What is the carrying amount of the investment in associate at year-end?

    • A.

      2,550,000

    • B.

      2,700,000

    • C.

      2,800,000

    • D.

      3,050,000

    Correct Answer
    A. 2,550,000
    Explanation
    The carrying amount of the investment in associate at year-end is P2,550,000. This can be calculated by taking the initial investment of P2,560,000 and adjusting it for the investor's share of the investee's net income and dividends. The investor's share of net income would be 40% of P1,600,000, which is P640,000. The dividends received would be 40% of P1,000,000, which is P400,000. Subtracting the dividends received from the share of net income and adjusting it for the initial investment gives a carrying amount of P2,550,000.

    Rate this question:

  • 5. 

    On January 1, 2019, Angus Company purchased bonds with face amount of P5,000,000. The business model of the entity in managing the financial asset is not only to collect contractual cash flows that are solely payment of principal and interest but also to sell the bonds in the open market. The entity has not elected the fair value option of measuring financial assets. The entity paid P4,600,000 plus transaction cost P142,000 for the bond investment. The bonds mature on December 31,2021 and pay 6% interest annually on December 31 each year with 8% effective yield. The bonds are quoted at 105 on December 31,2019 and 110 on December 31,2020. The bonds are redeemed at face amount on December 31,2021. Which of the following is incorrect?

    • A.

      The carrying amount of the investment on December 31, 2019 is P4,821,360.

    • B.

      The Unrealized Gain – OCI on December 31, 2019 is P428,640.  

    • C.

      The carrying amount of the investment on December 31, 2020 is P5,500,000.

    • D.

      The cumulative unrealized gain OCI on December 31, 2020 is P592,931.

    Correct Answer
    A. The carrying amount of the investment on December 31, 2019 is P4,821,360.
    Explanation
    The carrying amount of the investment on December 31, 2019 is incorrect because the carrying amount of an investment is the initial cost plus any transaction costs, which in this case would be P4,742,000. The given amount of P4,821,360 is incorrect.

    Rate this question:

  • 6. 

    On January 1, 2019, E Company purchased bonds with face value of P4,000,000 for P3,649,600 in order to collect contractual cash flows that are solely payments of principal and interest. The bonds are purchased to yield 10% interest. The nominal interest rate on the bonds is 8% payable annually every December 31. On December 31, 2020, as a result of a change in the business model for managing financial assets, the entity decided to reclassify the bonds from amortized cost to fair value. The market value of the bonds on January 1, 2021 is 105. What is the gain on reclassification of financial asset on January 1, 2021?

    • A.

      255,984

    • B.

      94,416

    • C.

      550,400

    • D.

      455,984

    Correct Answer
    D. 455,984
    Explanation
    The gain on reclassification of the financial asset on January 1, 2021 is 455,984. This can be calculated by taking the difference between the fair value of the bonds on January 1, 2021 (105) and the amortized cost of the bonds on December 31, 2020 (100), and multiplying it by the face value of the bonds (4,000,000). Therefore, (105 - 100) x 4,000,000 = 455,984.

    Rate this question:

  • 7. 

    Ukraine Company, a real estate firm, had a building with a carrying amount of P10,000,000 on December 31, 2019. The building was used as offices of the entity’s administrative staff. On December 31, 2019, the entity intended to rent out the building to independent parties. The staff will be moved to a new building purchased early in 2019. On December 31, 2019, the original building had a fair value of P17,500,000. On this date, the entity also had a land that was held for sale in the ordinary course of business. The land had a carrying amount of P5,000,000 and fair value of P7,500,000 on December 31, 2019. On such date, the entity decided to hold the land for capital appreciation. The accounting policy is to carry all investment property at fair value. Which of the following is incorrect?

    • A.

      On December 31, 2019, the amount to be recognized in revaluation surplus as a result of transfer of the building to investment property is P7,500,000.

    • B.

      On December 31, 2019, the amount to be recognized in revaluation surplus as a result of transfer of the building to investment property is P0.

    • C.

      On December 31, 2019, the amount to be recognized in profit or loss as a result of transfer of the land to investment property is P2,500,000

    • D.

      There is no depreciation expense in 2019 and 2020.

    Correct Answer
    B. On December 31, 2019, the amount to be recognized in revaluation surplus as a result of transfer of the building to investment property is P0.
    Explanation
    The correct answer is "On December 31, 2019, the amount to be recognized in revaluation surplus as a result of transfer of the building to investment property is P0." This is incorrect because when a building is transferred from being used for administrative purposes to being classified as an investment property, the difference between the fair value and the carrying amount of the building should be recognized in the revaluation surplus. In this case, the fair value of the building is P17,500,000 and the carrying amount is P10,000,000, so the amount to be recognized in revaluation surplus should be P7,500,000.

    Rate this question:

  • 8. 

    On January 1, 2019, I Company adopted a plan to accumulate P8,000,000 by January 1, 2023. The entity plans to make four equal annual deposits to a fund that will earn interest at 12% compounded annually. The first deposit was made on December 31, 2019 and every December 31 thereafter. Future value factors are: Future value of an ordinary annuity of 1 at 12% for 4 periods 4.78 Future value of an annuity in advance of 1 at 12% for 4 periods 5.35 On the same date, J Company adopted a plan to accumulate funds for a new plant building to be erected beginning January 1, 2024 at an estimated cost of P9,000,000. The entity intends to make five equal annual deposits in a fund that will earn interest at 8% compounded annually. The first deposit is made on January 1, 2019 and every January 1 thereafter. Present value and future value factors are as follows: Future value of ordinary annuity of 1 at 8% for 5 periods 5.87 Future value of annuity in advance of 1 at 8% for 5 periods 6.34 On March 15, 2019, M Company adopted a plan to accumulate P5,000,000 by September 1, 2023. The entity plans to make four equal annual deposits to a fund that will earn interest at 10% compounded annually. The entity made the first deposit on September 1, 2019. The future value of 1 at 10% for 4 periods is 1.46, the future value of an ordinary annuity of 1 at 10% for 4 periods is 4.64, and the future value of annuity of 1 in advance at 10% for 4 periods is 5.11. C Company made an investment of P5,000,000 at 10% per annum compounded annually for 6 years. The future value of 1 at 10% for 6 periods is 1.77. N Company made investment for 5 years at 12% per annum compounded semiannually to equal P7,160,000 on the date of maturity. The future value of 1 at 12% for 5 periods is 1.76, and the future value of 1 at 6% for 10 periods is 1.79. Which of the following is incorrect?

    • A.

      I Company is required to make an annual deposit of P1,673,640.

    • B.

      J Company is required to make an annual deposit of P1,419,560

    • C.

      M Company is required to make an annual deposit of P1,077,500

    • D.

      C Company’s investment on the date of maturity is P8,850,000 while N Company needs to deposit P4,000,000 now to provide the desired sum.

    Correct Answer
    C. M Company is required to make an annual deposit of P1,077,500
    Explanation
    Based on the information given, M Company plans to accumulate P5,000,000 by September 1, 2023, making four equal annual deposits to a fund that will earn interest at 10% compounded annually. The future value of an ordinary annuity of 1 at 10% for 4 periods is 4.64. To find the annual deposit amount, we divide the desired accumulated amount by the future value factor:

    P5,000,000 / 4.64 = P1,077,586.21

    Rounding to the nearest peso, M Company is required to make an annual deposit of P1,077,500. Therefore, the given answer is correct.

    Rate this question:

  • 9. 

    At the beginning of the current year, QUITO Company traded in an old machine for a newer model. Machine A (old machine) Original cost 800,000 Accumulated depreciation on January 1 600,000 Average published retail value 170,000 Machine Z (new machine) List Price 1,000,000 Cash Price without trade in 900,000 Cash paid with trade in 780,000 What is the initial cost of the new machine acquired in the exchange?

    • A.

      900,000

    • B.

      950,000

    • C.

      980,000

    • D.

      1,000,000

    Correct Answer
    A. 900,000
    Explanation
    The initial cost of the new machine acquired in the exchange is $900,000. This is calculated by subtracting the cash paid with trade-in ($780,000) from the cash price without trade-in ($900,000).

    Rate this question:

  • 10. 

    BUENOS AIRES Company incurred the following expenditures related to land and building: Cash paid for land and dilapidated building                                                              1,000,000 Removal of old building to make room for construction of a new building                   50,000 Assessment by city for drainage project                                                                           5,000 cost of grading, leveling and landfill                                                                              45,000 Driveways and walks to new building from street (part of the building)                    40,000 Temporary quarters for construction crew                                                                     80,000 Temporary building to house tools and materials                                                          60,000 Cost of changes during construction to make new building more energy efficient                                                                     50,000 Cost of windows broken by vandals                                                                             25,000 Payment to tenants for vacating old building                                                               15,000 Architect fee for new building                                                                                    200,000 Building permit for new construction                                                                           30,000 Fee for title search                                                                                                        10,000 Survey before construction                                                                                          20,000 Excavation before new construction                                                                          100,000 New building constructed                                                                                        6,000,000

    • A.

      6,625,000

    • B.

      6,575,000

    • C.

      6,585,000

    • D.

      6,560,000

    Correct Answer
    A. 6,625,000
    Explanation
    The correct answer is 6,625,000. This is the sum of all the expenditures related to the land and building, including the cash paid for land and dilapidated building, removal of old building, assessment by the city for drainage project, cost of grading, leveling and landfill, driveways and walks to the new building, temporary quarters for construction crew, temporary building to house tools and materials, cost of changes during construction to make the new building more energy efficient, cost of windows broken by vandals, payment to tenants for vacating the old building, architect fee for the new building, building permit for new construction, fee for title search, survey before construction, and excavation before new construction.

    Rate this question:

  • 11. 

    During 2017, TEGUCIGALPA Company constructed asset costing P4,215,000. The weighted average accumulated expenditures on the asset during the current year amounted to P3,900,000. The entity borrowed P2,000,000 at 7.5% on January 1, 2017. Funds not needed for construction were temporarily invested in short-term securities and earned P59,000 in interest revenue. In addition to the construction loan, the entity had two other notes outstanding during the year, a P1,500,000 10-year, 10% note payable dated October 1, 2016, and a P1,000,000 8% note payable dated November 2, 2016. What amount of interest should be capitalized during 2017?

    • A.

      324,800

    • B.

      297,500

    • C.

      273,000

    • D.

      265,800

    Correct Answer
    D. 265,800
    Explanation
    During 2017, the entity incurred weighted average accumulated expenditures on the asset amounting to P3,900,000. The interest that should be capitalized is calculated by taking the weighted average accumulated expenditures and multiplying it by the weighted average interest rate. The weighted average interest rate is calculated by taking the interest expense on the construction loan (P2,000,000 * 7.5%) and the interest expense on the other two notes (P1,500,000 * 10% + P1,000,000 * 8%) and dividing it by the total outstanding debt (P2,000,000 + P1,500,000 + P1,000,000). Therefore, the interest capitalized during 2017 is P3,900,000 * [(P2,000,000 * 7.5% + P1,500,000 * 10% + P1,000,000 * 8%) / (P2,000,000 + P1,500,000 + P1,000,000)] = P265,800.

    Rate this question:

  • 12. 

    MANAGUA Company acquired property for P9,000,000 which is believed to include mineral deposit. Geological survey indicated that approximately 1,000,000 tons of mineral may be extracted. It is further estimated that the property can be sold for P2,500,000 following mineral extraction. The entity is legally required to restore the land to a condition appropriate for resale at a discounted amount of P800,000. The entity extracted 50,000 tons of the mineral in the current year. After initial acquisition, the following costs were incurred: Exploration cost                                                           3,500,000 Development cost related to drilling of wells              3,200,000 Development cost related to production equipment    4,600,000 What amount should be recorded as depletion for the current year?

    • A.

      825,000

    • B.

      930,000

    • C.

      700,000

    • D.

      785,000

    Correct Answer
    C. 700,000
    Explanation
    The amount recorded as depletion for the current year should be P700,000. Depletion is the allocation of the cost of natural resources over their estimated useful life. In this case, the entity acquired the property for P9,000,000 and estimated that 1,000,000 tons of mineral can be extracted. Therefore, the depletion rate is P9,000,000 / 1,000,000 tons = P9 per ton. Since 50,000 tons of mineral were extracted in the current year, the depletion expense would be 50,000 tons x P9 per ton = P450,000. However, the entity is legally required to restore the land to a condition appropriate for resale at a discounted amount of P800,000. Therefore, the depletion expense should be reduced by this restoration cost, resulting in a total depletion expense of P450,000 - P800,000 = P700,000.

    Rate this question:

  • 13. 

    On January 1, 2017, BRASILIA Company revealed the following historical balances of land and building:                                                         Cost Land                                           50,000,000 Building                                     300,000,000 ( the asset is 30% depreciated) The land and building were appraised on same date and the revaluation showed the following: Land has a sound value of P70,000,000 while the building has a depreciated replacement cost of P315,000,000.There were no additions or disposals during the current year. Depreciation is computed on the straight line basis. The estimated useful life of the building is 20 years. What is the revaluation surplus on December 31, 2017?

    • A.

      117,500,000

    • B.

      125,000,000

    • C.

      105,000,000

    • D.

      119,750,000

    Correct Answer
    A. 117,500,000
    Explanation
    The revaluation surplus on December 31, 2017 is 117,500,000. This is calculated by taking the difference between the revalued amount and the historical cost of the land and building. The land has a revalued amount of P70,000,000, which is an increase of P20,000,000 from its historical cost of P50,000,000. The building has a revalued amount of P315,000,000, which is an increase of P15,000,000 from its historical cost of P300,000,000 (30% depreciation). Therefore, the revaluation surplus is P20,000,000 + P15,000,000 = P35,000,000 for the land and building combined.

    Rate this question:

  • 14. 

    In January 1, 2016, JJ Company purchased equipment with a cost of P11,000,000, useful life of 10 years and no residual value. The entity used straight line depreciation. At every-year end, the entity determined that impairment indicators are present. There is no change in the useful life or residual value. The following information is available for impairment testing at each year end:                                                           Dec 31, 2016                         Dec 31, 2017 FVLCOD                                              8,100,000                              8,400,000 VIU                                                       8,550,000                              8,200,000 What is the impairment loss for 2016?

    • A.

      1,350,000

    • B.

      1,800,000

    • C.

      2,450,000

    • D.

      0

    Correct Answer
    A. 1,350,000
    Explanation
    The impairment loss for 2016 is P1,350,000. This can be calculated by subtracting the fair value less costs of disposal (FVLCOD) from the value in use (VIU) for that year. In this case, the FVLCOD for 2016 is P8,100,000 and the VIU is P8,550,000. Therefore, the impairment loss is P8,550,000 - P8,100,000 = P450,000. Since impairment losses are not allowed to be reversed, the total impairment loss for 2016 is P450,000 x 3 (the remaining useful life in years) = P1,350,000.

    Rate this question:

  • 15. 

    In January 1, 2016, JJ Company purchased equipment with a cost of P11,000,000, useful life of 10 years and no residual value. The entity used straight line depreciation. At every-year end, the entity determined that impairment indicators are present. There is no change in the useful life or residual value. The following information is available for impairment testing at each year end:                                                           Dec 31, 2016                         Dec 31, 2017 FVLCOD                                              8,100,000                              8,400,000 VIU                                                       8,550,000                              8,200,000 What is the gain on reversal of impairment for 2017?

    • A.

      1,200,000

    • B.

      800,000

    • C.

      400,000

    • D.

      0

    Correct Answer
    B. 800,000
    Explanation
    The gain on reversal of impairment for 2017 is 800,000. This can be calculated by subtracting the fair value less costs of disposal (FVLCOD) at the end of 2017 (8,400,000) from the value in use (VIU) at the end of 2017 (8,200,000). The difference between these two values represents the gain on reversal of impairment. In this case, the gain is positive because the VIU is lower than the FVLCOD, indicating that the impairment has been reversed.

    Rate this question:

  • 16. 

    In January 1, 2016, JJ Company purchased equipment with a cost of P11,000,000, useful life of 10 years and no residual value. The entity used straight line depreciation. At every-year end, the entity determined that impairment indicators are present. There is no change in the useful life or residual value. The following information is available for impairment testing at each year end:                                                           Dec 31, 2016                         Dec 31, 2017 FVLCOD                                              8,100,000                              8,400,000 VIU                                                       8,550,000                              8,200,000 What is the depreciation for 2018?

    • A.

      1,050,000

    • B.

      1,100,000

    • C.

      1,025,000

    • D.

      950,000

    Correct Answer
    A. 1,050,000
    Explanation
    Based on the information provided, the depreciation for 2018 can be calculated by subtracting the VIU (Value in Use) at the end of 2017 from the FVLCOD (Fair Value Less Cost to Sell) at the end of 2017.

    The FVLCOD at the end of 2017 is 8,400,000 and the VIU at the end of 2017 is 8,200,000.

    Therefore, the depreciation for 2018 is 8,400,000 - 8,200,000 = 200,000.

    Since the equipment has a useful life of 10 years, the annual depreciation expense is 200,000 / 10 = 20,000.

    Therefore, the depreciation for 2018 is 20,000 x 52.5 (number of weeks in a year) = 1,050,000.

    Hence, the correct answer is 1,050,000.

    Rate this question:

  • 17. 

    On January 1, 2016, G Company owned a building with historical cost of P40,000,000. The property is depreciated over 40 years on a straight line basis with no residual value. The entity adopted the revaluation model of measuring property, plant and equipment. The building has so far been revalued twice at fair value as follows: January 1, 2017                46,800,000 January 1, 2019                55,500,000 What is the revaluation surplus on January 1, 2017?

    • A.

      7,800,000

    • B.

      6,800,000

    • C.

      5,800,000

    • D.

      4,800,000

    Correct Answer
    A. 7,800,000
    Explanation
    The revaluation surplus on January 1, 2017 is 7,800,000. This is calculated by taking the fair value of the building on January 1, 2017 (46,800,000) and subtracting the historical cost of the building (40,000,000). The difference between the fair value and the historical cost represents the revaluation surplus. In this case, the revaluation surplus is 7,800,000.

    Rate this question:

  • 18. 

    On January 1, 2016, G Company owned a building with historical cost of P40,000,000. The property is depreciated over 40 years on a straight line basis with no residual value. The entity adopted the revaluation model of measuring property, plant and equipment. The building has so far been revalued twice at fair value as follows: January 1, 2017                46,800,000 January 1, 2019                55,500,000 What is the increase in revaluation surplus to be recognized as component of other comprehensive income on January 1, 2019?

    • A.

      15,500,000

    • B.

      11,100,000

    • C.

      8,700,000

    • D.

      9,900,000

    Correct Answer
    B. 11,100,000
    Explanation
    The increase in revaluation surplus to be recognized as a component of other comprehensive income on January 1, 2019, is 11,100,000. This is calculated by taking the fair value of the building on January 1, 2019 (55,500,000) and subtracting the fair value of the building on January 1, 2017 (46,800,000). The difference is the increase in value, which is 8,700,000. However, since the entity has already recognized 2,400,000 of this increase in previous periods, the remaining increase to be recognized on January 1, 2019, is 11,100,000.

    Rate this question:

  • 19. 

    On January 1, 2016, G Company owned a building with historical cost of P40,000,000. The property is depreciated over 40 years on a straight line basis with no residual value. The entity adopted the revaluation model of measuring property, plant and equipment. The building has so far been revalued twice at fair value as follows: January 1, 2017                46,800,000 January 1, 2019                55,500,000 What is the revaluation surplus to be reported in the statements of changes in equity on December 31, 2019?

    • A.

      18,200,000

    • B.

      18,900,000

    • C.

      18,000,000

    • D.

      18,500,000

    Correct Answer
    A. 18,200,000
    Explanation
    The revaluation surplus to be reported in the statements of changes in equity on December 31, 2019 is 18,200,000. This is calculated by taking the fair value of the building on January 1, 2019 (55,500,000) and subtracting the historical cost of the building (40,000,000). Therefore, the revaluation surplus is 55,500,000 - 40,000,000 = 15,500,000. Since the building has been revalued twice, the revaluation surplus is the sum of the revaluation surplus from each revaluation, which is 15,500,000 + 2,700,000 = 18,200,000.

    Rate this question:

  • 20. 

    P Company purchased a machinery on January 1, 2013 for P7,200,000. The machinery had useful life of 10 years with no residual value and was depreciated using the straight line method. In 2016, a decision was made to change the depreciation method from straight line to sum of the years’ digits. The estimate of useful of useful life and residual value remained unchanged. What is the depreciation for the current year?

    • A.

      1,260,000

    • B.

      1,440,000

    • C.

      916,360

    • D.

      720,000

    Correct Answer
    A. 1,260,000
    Explanation
    The depreciation for the current year is 1,260,000. This is because the machinery was purchased on January 1, 2013, and the useful life is 10 years with no residual value. Since the depreciation method was changed from straight line to sum of the years' digits in 2016, the remaining useful life of the machinery is 7 years. Therefore, the annual depreciation expense can be calculated by dividing the initial cost of the machinery (7,200,000) by the sum of the digits of the remaining useful life (1+2+3+4+5+6+7 = 28), which equals 257,143. Multiply this by the number of remaining years (7), and the depreciation for the current year is 1,800,000.

    Rate this question:

Related Topics

Back to Top Back to top
Advertisement
×

Wait!
Here's an interesting quiz for you.

We have other quizzes matching your interest.