Question
Bracy Company acquired a new piece of construction equipment on January 1, 2015, at a cost of $92,300. The equipment was expected to have a
Bracy Company acquired a new piece of construction equipment on January 1, 2015, at a cost of $92,300. The equipment was expected to have a useful life of 7 years and a residual value of $16,000 and is being depreciated on a straight-line basis.
On January 1, 2016, the equipment was appraised and determine to have a fair value of $92,920, a salvage value of $16,000, and a remaining useful life of six years.
a. Determine the amount of depreciation expense that Bracy should recognize in determining net income in 2015, 2016, and 2017 and the amount at which equipment should be carried on December 31, 2015, 2016, and 2017 balance sheets using (1) U.S. GAAP and (2) IFRS. In measuring property, plant, and equipment subsequent to the acquisition, Bracy used the revaluation model in IAS16.
b. Determine the adjustments that Bracy would make in 2015, 2016, and 2017 to reconcile net income and stockholders' equity under U.S. GAAP to IFRS.
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