The information that follows relates to equipment owned by Pearl Limited at December 31, 2017: Cost $7,560,000 Accumulated depreciation to date 840,000 Expected future net cash flows (undiscounted) 5,880,000 Expected future net cash flows (discounted, value in use) 5,334,000 Fair value 5,208,000 Costs to sell (costs of disposal) 42,000 Assume that Pearl will continue to use this asset in the future. As at December 31, 2017, the equipment has a remaining useful life of four years. Pearl uses the straight-line method of depreciation. Assume that Pearl is a private company that follows ASPE. 1. Prepare the journal entry at December 31, 2017, to record asset impairment, if any. 2. Prepare the journal entry to record depreciation expense for 2018. 3. The equipment’s fair value at December 31, 2018, is $5.46 million. Prepare the journal entry, if any, to record the increase in fair value. Repeat the requirements in (a) above assuming that Pearl is a public company that follows IFRS.
The information that follows relates to equipment owned by Pearl Limited at December 31, 2017: Cost $7,560,000 Accumulated depreciation to date 840,000 Expected future net cash flows (undiscounted) 5,880,000 Expected future net cash flows (discounted, value in use) 5,334,000 Fair value 5,208,000 Costs to sell (costs of disposal) 42,000 Assume that Pearl will continue to use this asset in the future. As at December 31, 2017, the equipment has a remaining useful life of four years. Pearl uses the straight-line method of depreciation. Assume that Pearl is a private company that follows ASPE. 1. Prepare the journal entry at December 31, 2017, to record asset impairment, if any. 2. Prepare the journal entry to record depreciation expense for 2018. 3. The equipment’s fair value at December 31, 2018, is $5.46 million. Prepare the journal entry, if any, to record the increase in fair value. Repeat the requirements in (a) above assuming that Pearl is a public company that follows IFRS.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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The information that follows relates to equipment owned by Pearl Limited at December 31, 2017:
| Cost | $7,560,000 | |
| 840,000 | ||
| Expected future net |
5,880,000 | |
| Expected future net cash flows (discounted, value in use) | 5,334,000 | |
| Fair value | 5,208,000 | |
| Costs to sell (costs of disposal) | 42,000 |
Assume that Pearl will continue to use this asset in the future. As at December 31, 2017, the equipment has a remaining useful life of four years. Pearl uses the straight-line method of depreciation.
Assume that Pearl is a private company that follows ASPE.
| 1. |
Prepare the |
|
| 2. |
Prepare the journal entry to record depreciation expense for 2018. | |
| 3. |
The equipment’s fair value at December 31, 2018, is $5.46 million. Prepare the journal entry, if any, to record the increase in fair value. |
Repeat the requirements in (a) above assuming that Pearl is a public company that follows IFRS.
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