1. (25 points) Boston Inc. bought a new snow-melting machine on March 1, 2013 for $100,000. Boston expected to use the snow-melter for five years, and expected it to be worth $10,000 as salvage at the end of the five years. However, there was so much snow to melt that the company is afraid that most of the snow-melters services are used up by March 1, 2015. Boston has been using straight-line depreciation, and is a March 1 fiscal year end company. As of March 1, 2015, the bookkeeper estimates that the snow-melter will generate future cashflows of $50,000, or could be sold for $45,000. Give the journal entries to record the impairment loss and annual depreciation for 2015. 2. (15 points) Assume the same facts as above, except that on March 1, 2016, snow-melters have become collectors items, so the machine could be sold for $60,000. How much of the impairment loss can be recovered for financial reporting purposes? 3. (10 points) Jia Jets acquired a wooded piece of land in Indiana on April 1, 2014. The land cost $100,000. Jia Jets reports under IFRS and revalues its land. On December 31, 2017, the fair value of the land is $90,000. On December 31, 2020, the fair value of the land is $110,000. Provide all necessary journal entries for 2014 through 2020, and give the effect of each entry on net income for the year. 4. (30 points) Pownall Inc. reports using IFRS and uses the revaluation method to account for PPE under IAS 16. The company acquired a printing press on January 1, 2011. The press had an expected useful life of 10 years and zero residual value. The cost of the press was $100,000. Pownall uses straight-line depreciation and the depreciation-elimination method for revaluations. On December 31, 2013, the fair value of the press was $71,000. On December 31, 2016, the fair value of the press was $40,000. Provide all necessary journal entries for 2011 through 2016. 5. (20 points) Merage Inc. needs a new school building and decides to build one in sunny southern California. The building will be quite elegant and will house state-of-the-art technology. As a consequence, Merage projects it will take two years to construct the building. To finance the project during construction, Merage borrows $2,000,000,000 at 2% interest from the Bank of California on January 1, 2012. It pays Irvine Construction Company $1,000,000,000 on January 1, 2012 to begin work on the building, $500,000,000 on December 31, 2012 as a progress payment, and $500,000,000 on December 31, 2013 when the building is completed. Merage invests all spare cash from the loan in marketable securities that yield 3%. How much interest should Merage capitalize as a result of these activities if Merage uses IFRS? How much interest should Merage capitalize as a result of these activities if Merage uses US GAAP?