On January 1, 2023, Clark Inc. sold a piece of equipment to Daye Ltd. for $200,000, and
Question:
On January 1, 2023, Clark Inc. sold a piece of equipment to Daye Ltd. for $200,000, and immediately leased the equipment back. At the time, the equipment was carried on Clark’s books at a cost of $300,000, less accumulated depreciation of $120,000. The lease is a capital lease to Clark, with a lease term of five years. The equipment under capital lease will be depreciated in Clark’s books over five years using double-declining balance depreciation.
(a) Calculate the amortization of the deferred gain on sale to be recorded at the end of 2023, if Clark follows ASPE.
(b) Assume that 30% of the gain related to the rights transferred to Daye and 70% related to the right to use the equipment retained by Clark. Calculate the amount of gain to be recognized by Clark under IFRS.
Step by Step Answer:
Intermediate Accounting Volume 2
ISBN: 9781119740445
13th Canadian Edition
Authors: Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield, Irene M. Wiecek, Bruce J. McConomy