On April 1, 2020, Lombardi Corp. was awarded $460,000 cash as compensation for the forced sale of
Question:
On April 1, 2020, Lombardi Corp. was awarded $460,000 cash as compensation for the forced sale of its land and building, which were directly in the path of a new highway. The land and building cost $60,000 and $280,000, respectively, when they were acquired. At April 1, 2020, the accumulated depreciation for the building amounted to $165,000. On August 1, 2020, Lombardi purchased a piece of replacement property for cash. The new land cost $160,000 and the new building cost $410,000. The new building is estimated to have a useful life of 20 years, physical life of 30 years, residual value of $230,000, and salvage value of $75,000. Lombardi prepares financial statements in accordance with IFRS.
Instructions
a. Prepare the journal entries to record the transactions on April 1 and August 1, 2020.
b. How would the transactions on April 1 and August 1, 2020, affect the income statement for 2020? Would the effect be different if Lombardi prepared financial statements in accordance with ASPE?
c. Prepare the journal entries required at December 31, 2020, under (1) IFRS and (2) ASPE.
Financial StatementsFinancial statements are the standardized formats to present the financial information related to a business or an organization for its users. Financial statements contain the historical information as well as current period’s financial... Salvage Value
Salvage value is the estimated book value of an asset after depreciation is complete, based on what a company expects to receive in exchange for the asset at the end of its useful life. As such, an asset’s estimated salvage value is an important...
Step by Step Answer:
a April 1 Cash 460000 Accumulated Depreciation x Buildings 165000 Land 60000 ...View the full answer
Intermediate Accounting Volume 1
ISBN: 978-1119496496
12th Canadian edition
Authors: Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield, Irene M. Wiecek, Bruce J. McConomy
