Edwards Ltd has two pieces of equipment in its balance sheet as follows:
$\begin{array} { l c c c c c }
\begin{array} { l }
\text { Item } \
\text { no. }
\end{array} & \begin{array} { c }
\text { Cost or } \
\text { revalued } \
\text { amount }
\end{array} & \begin{array} { c }
\text { Accumulated } \
\text { Depreciation }
\end{array} & \text { Value in Use } & \text { Fair value } & \begin{array} { c }
\text { Estimated } \
\text { cost to sell }
\end{array} \
1 & \$ 600000 & \$ 100000 & \$ 600000 & \$ 450000 & \$ 20000 \
2 & \$ 800000 & \$ 400000 & \$ 450000 & \$ 500000 & \$ 25000 \
\text { Total } & \$ \mathbf { 4 0 0 0 0 0 } & \$ \mathbf { 5 0 0 0 0 0 } & & &
\end{array}$
-If Edwards Ltd applies the cost model to the assets, at what amount will asset 2 be reported in the balance sheet?
A)$400,000
B)$450,000
C)$500,000
D)$475,000

Question

Edwards Ltd has two pieces of equipment in its balance sheet as follows:
$\begin{array} { l c c c c c } 
\begin{array} { l } 
\text { Item } \
\text { no. }
\end{array} & \begin{array} { c } 
\text { Cost or } \
\text { revalued } \
\text { amount }
\end{array} & \begin{array} { c } 
\text { Accumulated } \
\text { Depreciation }
\end{array} & \text { Value in Use } & \text { Fair value } & \begin{array} { c } 
\text { Estimated } \
\text { cost to sell }
\end{array} \
1 & \$ 600000 & \$ 100000 & \$ 600000 & \$ 450000 & \$ 20000 \
2 & \$ 800000 & \$ 400000 & \$ 450000 & \$ 500000 & \$ 25000 \
\text { Total } & \$ \mathbf { 4 0 0 0 0 0 } & \$ \mathbf { 5 0 0 0 0 0 } & & &
\end{array}$
-If Edwards Ltd applies the cost model to the assets, at what amount will asset 2 be reported in the balance sheet?
A)$400,000
B)$450,000
C)$500,000
D)$475,000

Quizplus · Accepted Answer

Asset 2 will be reported at its carrying amount, which is the cost ($800,000) minus accumulated depreciation ($400,000), resulting in $400,000.

Edwards Ltd Has Two Pieces of Equipment in Its Balance