ABC Inc, was incorporated on January 1, 2017 and wants to go public by the end of 2019. You have been engaged to audit the IFRS financial statements for the year ended December 31, 2018. The corporation's trial balance is as follows:

ABC Inc. Trial Balance (extract)

December 31, 2018

Debit

Credit

Inventory

55,000

Land

500,000

Building

250,000

Machinery

72,000

Equipment

5,200

Accumulated depreciationPPE

36,480

Intangible assetspatents

75,000

Goodwill

30,000

Accumulated amortizationgoodwill

1,000

Intangible assetslicensing agreement

60,000

Unearned revenue

5,000

Legal expenses

50,000

Selling expenses

105,000

Additional notes:

(1)ABC's depreciation policy for property, plant and equipment is straight-line method taken over the estimated useful life reported below. Depreciation for PPE had been correctly recorded for 2018, but no amortization was recorded for intangible assets.

o10 years for machinery

o5 years for equipment

o25 years for building.

(2)Inventory is made up of chocolate bonbons and chocolate bars.

oThe bonbons inventory cost $25,000 and is valued at $30,000 selling price. The accountant recorded the difference as an increase in inventory and unearned revenue.

oThe chocolate bars inventory cost $25,000 and is waiting to be sold for an estimated selling price of $20,000. The accountant did not think decreasing inventory will be good for the company, so they did not record this difference.

(3)ABC purchased a patent for its chocolate production method on January 1, 2018 for $75,000. On November 1, 2018, the company spent an additional $50,000 to legally defend their right to use the patent, which the accountant expensed immediately. The legal life of the patent is 15 years.

(4)On July 1, 2017, ABC purchased a licensing agreement to use the patent of another well-known chocolate production company. ABC believed that this agreement had an unlimited useful life. An evaluation showed that cash flows from the licensing agreement would be about 12 years. After the 12 years, further cash flows are still possible, but are uncertain.

(5)The goodwill account includes incorporation fees of $30,000. As the company is expected to be profitable for the long- term, management is amortizing goodwill over 30 years.

Required:

a)Prepare all the necessary journal entries based on the information at December 31, 2018.

On July 1, 2019, ABC sold the land for $400,000 and the building for $211,000 in cash. Prepare the journal entries to reflect these events.

b)On July 1, 2019, ABC sold the land for $400,000 and the building for $211,000 in cash. Prepare the journal entries to reflect these events.