A Slope Boss Snowboarding Company, a public company, purchased equipment on January 10, 2010, for $750,000. At

Question:

A Slope Boss Snowboarding Company, a public company, purchased equipment on January 10, 2010, for $750,000. At that time, management estimated that the equipment would have a useful life of 10 years and a residual value of $50,000. Slope Boss uses the straight-line method of depreciation and has a December 31 year end. Slope Boss tested the equipment for impairment on December 31, 2014, after recording the annual depreciation expense. It was determined that the equipment’s recoverable amount was $320,000, and that the total estimated useful life would be eight years instead of 10, with a residual value of $10,000 instead of $50,000.

Instructions

(a) Calculate the annual depreciation expense for the years 2010 to 2014 and the carrying amount at December 31, 2014.

(b) Record the impairment loss, if any, on December 31, 2014.

(d) Assuming no further impairments or recoveries, calculate the annual depreciation expense for the years 2015 to 2017.

(e) Determine the equipment’s accumulated depreciation and carrying amount at the end of its useful life.

TAKING IT FURTHER

Suggest some possible reasons as to why companies are allowed to record recoveries of previously recorded impairments under IFRS but not under ASPE.

Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...