Property, Plant & Equipment - P2 Flashcards
PPE2
Subsequent Measurement?
Entity Chooses between?
Cost Model
Revaluation Model
Note: The model chosen applies to an entire class of PPE
PPE
What is Cost Model?
An entire class of PPE is carried at its cost less any accumulated depreciation and any accumulated impairment losses
If the PPE becomes idle, is depreciation ceases?
No
Depreciation Methods
Under Uniform or Fixed Charge Method?
Amd its formula?
- Straight Line Method
Depn Exp = Depreciable Amt. / Useful Life in Years
Wherein Depreciable Amt is = to cost minus residual value
- Composite and Group Method
Please review
Depreciation Methods
Under Variable Charge Method?
And its formula?
Working Hours / Unit of Production Method
*Depreciation is function of usage rather than function of time
DEP EXP = (Depreciable Amt / Total Estimated Ouput or Hours) x Actual Output or Hours during the year
Cosiders RV
Depreciation Methods
Decreasing Charge or Accelerated Method?
And its formula?
- SYD Method
*multiplying depreciable amt by series of fraction. PLEASE REMEBER THAT DEPRECIABLE AMT WILL BE USED IN ALL YEARS!!
*wherein fraction numerator-(una pinaka total year); denominator-sum of useful life digits(i.e. 5 years =15)
*results in decreasing depreciation charges over life of asset
*considers RV - Declining Balance Method aka fixed rate or percentage on diminishing CA method
-200% or double declining rate= 2 / Useful life
-150% declining rate = 1.5/useful life
Note:1st year - Cost × Declining Rate
2nd year - CA × Declining rate
Then, sa final year, balancing figure. Cause you have to consider the RV. kelangan yung matitira equal padin sa RV!!
*could be double declining or 150% which is the same in application. But diff in computing declining rate
*ignores RV
Depreciation Methods
Other Methods?
And its formula?
- Retirement Method:
*the cost of an asset is retained pn the books
*No depn is recorded until the asset is retired - Replacent Method:
Same with retirement - Inventory Method
*The dpn is computed after conducting physical count
PPE
The only depreciation method that ignores Residual Value is?
Declining Method. But considers the RV sa final year. Cause the final CA should be equal to RV!
Sale of PPE under cost model is plain and simple.
Formula for gain/loss?
Just
Net Proceeds
Less: Costs incurred on the sale
Less: CA of Asset
=Gain/Loss
CA IS NET OF ACCU DEP ONLY! NOT RV!
PPE?
Change in Acctg Estimate concept and effect?
*Should be Prospectively
*affects only current and future
* just get the new estimate aka “as if” value
When an item of PPE is revalued the entire PPE must be____
Revalued
PPE Revaluation
If the Fair Value cannot be measured reliably, what should be used?
Depreciated Replacement Cost
PPE
Revaluation Surplus=?
FV or Depreciated Replacement Cost Less CA
PPE
Two Methods of Recording Revaluation?
- Proportional Approach- The Accu Depn is restated proportionately with the change in the gross CA of the asset. Meaning idedepreciate mo din as if yung FV or Deperaciated Raplacement Cost.
Dr. PPE
Cr. Accu Dep
Cr. Revaluation Surplus - Elimination Approach - The Accu Depn is eliminated.
Dr. Accu Dep
Cr. Revaluation Surplus
Proportional Approach/Piecemeal Realization is common. Pero kahit anong approach parehas paring ng CA at the end of the day
Presentation of Revaluation Surplus in:
IS and BS
Income Statement - OCI (Change in Revaluation)
Balance Sheet - Equity (yung tira-balance)
