5.Mohammed Ltd. purchased $181,200 of 6-year, 8% bonds from Caleb Corp for $172,939 on January 1,

2020. The market rate of interest is 9%. Mohammed Ltd. classified the investment using the amortized

cost method. The bonds pay interest semi-annually.

Required:

a) make the journal entry for the purchase of the investment and receipt of interest for the first two

interest payments received. Assume that Mohammed Ltd. uses IFRS.

b) make the same three journal entries required above assuming that Mohammed Ltd. uses ASPE

and has chosen to use the straight-line method to amortize the discount.

6Oliver Corporation depreciates machinery at a rate of 10% per year and buildings at a rate of 5% per

year.

The following transactions occurred in 2020:

March 31, 2020

A building which Oliver Corporation had purchased on January 1, 2007 for $1.9 million (with

a current fair value of $1 million) was exchanged for another building which also had a

current fair value of $1 million. Depreciation has been properly charged from Jan 1, 2007

through Dec 31, 2019. Both parcels of land on which the buildings were located were equal

in value, and had a fair value equal to book value.

September 30, 2020

Machinery with a cost of $150,000 and accumulated depreciation through December 31,

2019 of $60,000 was exchanged, along with $68,000 cash, for a parcel of land with a fair

market value of $132,000.

Required:

Prepare all appropriate journal entries for Oliver Corporation for the above dates.

Question 7

Pia Corporation owns a building that it had purchased on January 1, 2019 for $2,500,000 cash and is

accounted for in a separate account. The company is using the revaluation model to account for its

buildings and revalues them annually. Pia Corporation uses straight-line depreciation over the asset's

20-year useful life with no residual value. The asset's fair value was equal to its book value on Dec. 31,

2019, and was $2,300,000 on Dec. 31, 2020.

Required: Assuming Pia Corporation uses the asset adjustment (elimination) method for revaluation,

prepare all required journal entries for 2019 and 2020.

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Question 8

On January 20, 2018, Conrad Corp. purchased a high-end condo complex for $9,800,000 cash. In

addition to the purchase price, Conrad Corp. paid transfer fees of $180,000, and legal fees of $17,000.

The complex qualifies as an investment property. Conrad Corp. uses IFRS and applies the fair value

model to all its investment properties. Assume a December 31 year end.

Wages paid to maintenance staff during each of the following three years:

2018: $115,000

2019: $119,000

2020: $114,500

Fair value information:

Dec 31, 2018: $9,400,000

Dec 31, 2019: $10,100,000

Dec 31, 2020: $10,350,000

Required: Prepare the journal entries for 2018, 2019, and 2020.

Question 9

In February 2019, Quessa Corp. began the construction of a multi-story building. The construction is

expected to be completed by January 2020.

During 2019, the following payments were made:

May 1: $2,000,000

July 1: $3,000,000

Sept 1: $1,800,000

Nov 1: $1,900,000

No asset specific debt was incurred.

During 2019, Quessa's general debt consisted of the following:

$4,000,000, 4%, 3-year note,

$2,400,000, 5.5%, 2-year note,

$1,500,000, 3.8%, 4-year note.

Required:

a) Calculate the weighted-average accumulated expenditures for the year ended December 31,

2019.

b) Calculate the weighted-average capitalization rate on Quessa's general-purpose debt for the

year ended December 31, 2019.

c) Calculate the avoidable borrowing costs.

d) Calculate the amount of Quessa's borrowing costs that should be capitalized.

Question 10

Six identical vehicles which cost $600,000 total are acquired by Nick Ltd. on April 1, 2020. Their

estimated residual value is $6,000 each and expected life is seven years. These assets are Class 10

with a maximum capital cost allowance rate of 30%. Nick Ltd. has a December 31 year end.

Required:

a) Calculate the depreciation expense or capital cost allowance using the following methods for

both 2020 and 2021. (round to the nearest dollar)

1) Straight-line

2) Double-declining balance

3) Maximum capital cost allowance

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Question 11

Required: State whether the following statements are true or false. If the statement is false, rewrite it

to make it true.

1. Once a loss has been recognized, IFRS prohibits the subsequent reversal of that loss.

2. Only assets with cash flows that are independent from those of other assets are included in a

cash-generating unit (CGU).

3. When using the straight-line method, an asset's residual value is deducted in the calculation of

depreciation expense

4. An asset that has been depreciated to its residual value can continue to be depreciated until it

reaches a net book value of zero.

5. The choice of depreciation method is specified in GAAP and does not require the use of

professional judgment.

6. Depreciation is the process of allocating the cost of assets in a manner that is consistent with

the desired effect on income.

7. Changes in the depreciation rate due to changes in the estimate of the asset's useful life are

accounted for in the current and future periods.

8. Gains and losses from the disposal of property, plant and equipment are always reported as

part of other comprehensive income.

9. The term "recoverable amount" with respect to a capital asset's impairment has the same

definition under ASPE and IFRS.