Asked by Daylanie Flores on Jul 29, 2024
Verified
If a residual value is determined to be of a material amount the entity is required to review the residual value:
A) monthly.
B) at the end of each reporting period.
C) when completing interim reports.
D) at no time.
Residual Value
The estimated value that an asset will realize upon its sale at the end of its useful life.
Material Amount
A sum of money that is large enough to influence the economic decisions of users based on the financial statements of an entity.
Reporting Period
The specific time span covered by financial statements, typically one fiscal year or quarter, for which an entity reports its financial performance and position.
- Analyze the disclosure requirements for property, plant, and equipment under the relevant accounting standards.
Verified Answer
RJ
Raymart Joseph SindacAug 01, 2024
Final Answer :
B
Explanation :
The entity is required to review the residual value at the end of each reporting period if it is determined to be of a material amount. This ensures that the carrying amount of the asset is not materially overstated or understated in the financial statements. Monthly reviews (Choice A) may be too frequent and unnecessary, while reviewing only when completing interim reports (Choice C) may not be timely enough to reflect any changes in the residual value. Answer D is incorrect as the entity is required to review the residual value if it is of a material amount.
Learning Objectives
- Analyze the disclosure requirements for property, plant, and equipment under the relevant accounting standards.