Original cost Straight-Line Method Fair value Costs to sell (including $20,000 taxes) Incremental cash flow 2018 $4,000.000 10 years $2,000,000 120,000 500,000 Incremental cash flow 2019 400,000 Incremental cash flow 2020 700,000 Incremental cash flow 2021 800,000 Incremental cash flow from 2022 to later Cost of capital 0 10% MEDLink System Inc. ("MEDLink") is a privately held company specializing in customized medical software to manage patient records for the medical offices, medical laboratories and hospitals across Canada. MEDLink users are healthcare administrators and professionals (lab technicians, nurses and doctors) across Canada. The company has been operating from its headquarters in the Lower Mainland of BC since Jan 1, 2018. The company's fiscal year end is December 31. For the first time since its inception, an external auditor had been appointed to conduct an audit prior to issuing the financial statements planned for April 15, 2022. Server Farm (servers and network assets) When the servers and network assets were initially purchased in 2018, the company had to arrange for long distance transportation from Toronto, costing $16,000. Insurance while in transit was $34,000. The company also had to pay technical engineers to install and setup the equipment, costing $35,000. Start-up and testing costs were another $ 15,000. Total expenditure $100,000 was fully expensed in 2018. For the year ended Dec 31, 2021 Meg gathered the following information on the server farm assets. Despite evidence from internal reporting shows performance below expectations, no impairment was recognized. (Picture is information) Required: Regarding server farm, provide correct calculations and journal entries for each transaction in compliance with IFRS. Include your assumptions in the calculations/journal entries.
Original cost Straight-Line Method Fair value Costs to sell (including $20,000 taxes) Incremental cash flow 2018 $4,000.000 10 years $2,000,000 120,000 500,000 Incremental cash flow 2019 400,000 Incremental cash flow 2020 700,000 Incremental cash flow 2021 800,000 Incremental cash flow from 2022 to later Cost of capital 0 10% MEDLink System Inc. ("MEDLink") is a privately held company specializing in customized medical software to manage patient records for the medical offices, medical laboratories and hospitals across Canada. MEDLink users are healthcare administrators and professionals (lab technicians, nurses and doctors) across Canada. The company has been operating from its headquarters in the Lower Mainland of BC since Jan 1, 2018. The company's fiscal year end is December 31. For the first time since its inception, an external auditor had been appointed to conduct an audit prior to issuing the financial statements planned for April 15, 2022. Server Farm (servers and network assets) When the servers and network assets were initially purchased in 2018, the company had to arrange for long distance transportation from Toronto, costing $16,000. Insurance while in transit was $34,000. The company also had to pay technical engineers to install and setup the equipment, costing $35,000. Start-up and testing costs were another $ 15,000. Total expenditure $100,000 was fully expensed in 2018. For the year ended Dec 31, 2021 Meg gathered the following information on the server farm assets. Despite evidence from internal reporting shows performance below expectations, no impairment was recognized. (Picture is information) Required: Regarding server farm, provide correct calculations and journal entries for each transaction in compliance with IFRS. Include your assumptions in the calculations/journal entries.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Original cost
Straight-Line Method
Fair value
Costs to sell (including $20,000 taxes)
Incremental cash flow 2018
$4,000.000
10 years
$2,000,000
120,000
500,000
Incremental cash flow 2019
400,000
Incremental cash flow 2020
700,000
Incremental cash flow 2021
800,000
Incremental cash flow from 2022 to later
Cost of capital
0
10%
Transcribed Image Text:MEDLink System Inc. ("MEDLink") is a privately held company specializing in customized medical software to manage
patient records for the medical offices, medical laboratories and hospitals across Canada. MEDLink users are
healthcare administrators and professionals (lab technicians, nurses and doctors) across Canada.
The company has been operating from its headquarters in the Lower
Mainland of BC since Jan 1, 2018. The company's fiscal year end is
December 31. For the first time since its inception, an external auditor had been appointed to conduct an audit prior
to issuing the financial statements planned for April 15, 2022.
Server Farm (servers and network assets)
When the servers and network assets were initially purchased in 2018, the company had to arrange for long distance
transportation from Toronto, costing $16,000. Insurance while in transit was $34,000. The company also had to pay
technical engineers to install and setup the equipment, costing $35,000. Start-up and testing costs were another $
15,000. Total expenditure $100,000 was fully expensed in 2018.
For the year ended Dec 31, 2021 Meg gathered the following information on the server farm assets. Despite evidence
from internal reporting shows performance below expectations, no impairment was recognized.
(Picture is information)
Required:
Regarding server farm, provide correct calculations and journal entries for each transaction in compliance with IFRS.
Include
your assumptions in the calculations/journal entries.
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