Llungby AB spent 1,000,000 krone in 2020 on the development of a new product. The company determined that 25 percent of thisamount was incurred after the criteria in IAS 36 for capitalization as an intangible asset had been met. The newly developed product isbrought to market in January 2021 and is expected to generate sales revenue for five years.Assume that Llungby AB is a foreign company using IFRS and is owned by a company using U.S. GAAP. Thus, IFRS balances must beconverted to U.S. GAAP to prepare consolidated financial statements. Ignore income taxes.Required:a. Prepare journal entries for development costs for the years ending December 31, 2020, and December 31, 2021, under (1) IFRS and(2) U.S. GAAP.b. Prepare the entry(ies) that the U.S. parent would make on the December 31, 2020, and December 31, 2021, conversion worksheetsto convert IFRS balances to U.S. GAAP.Required ARequired BPrepare journal entries for development costs for the years ending December 31, 2020, and December 31, 2021, under (1)IFRS and (2) U.S. GAAP. (If no entry is required for a transaction/event, select "No journal entry required" in the first accountfield.)NoDateGeneral JournalDebitCredit112/31/2020Development expense750,000 OIntangible asset250,000Cash1,000,000 O12/31/2020Retained earnings200,000312/31/2021Amortization expense50,000Intangible asset50,00012/31/2021No journal entry requiredRequired ARequired BPrepare the entry(ies) that the U.S. parent would make on the December 31, 2020, and December 31, 2021, conversionworksheets to convert IFRS balances to U.S. GAAP. (If no entry is required for a transaction/event, select "No journal entryrequired" in the first account field.)NoDateGeneral JournalDebitCredit112/31/2020Development expense250,000 OIntangible asset250,000212/31/2021Intangible asset50,000 XAmortization expense50,000 O000

Financial transactions are initially recorded in the form of a journal entry. The transactions are…

Llungby AB spent 1,000,000 krone in 2020 on the development of a new product. The company determined that 25 percent of this amount was incurred after the criteria in IAS 36 for capitalization as an intangible asset had been met. The newly developed product is brought to market in January 2021 and is expected to generate sales revenue for five years.

Llungby AB spent 1,000,000 krone in 2020 on the development of a new product. The company determined that 25 percent of this amount was incurred after the criteria in IAS 36 for capitalization as an intangible asset had been met. The newly developed product is brought to market in January 2021 and is expected to generate sales revenue for five years.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Subject :- Accounting
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