Building:

On Jan 1, 2020, DRLink built two similar buildings in Surrey. Building North is the main administration office and Building South is the data centre facility. Each building took a year to build and required $1,200,000 in construction costs. Given that interest rate was cheap, the company funded North building internally while financed South building by borrowing $1,200,000 3 | P a g e evenly over the year (i.e. zero at the beginning of the year and increasing to $1,200,000 by the end of the year in 2020.) The interest rate on the loan is 6%. Both buildings were completed by December 31, 2020, and were ready for occupancy immediately. However, due to personal reasons from the senior management, the staff did not move to the two buildings until March 31, 2021. The Controller (Meg Nutt) capitalized the construction costs including borrowing costs for the 15-month period from Jan 1, 2020 to March 31, 2021. The buildings are estimated to have a useful life of 20 years with no residual value. The company uses the straight-line method for depreciation. The two buildings sit on a vacant farmland which belongs to the City of Surrey. The company signed a lease with the Surrey Municipality at an affordable monthly lease rate of $10,000 for 30 years. As part of the lease agreement, the municipality requires DRLink to restore the site to conditions similar to the state prior to the construction (i.e. farmland). The company estimates that it will need to incur $120,000 to dismantle, remove and restore the site at the end of the 30-year lease. No provision was made for this item. Both buildings have been recorded at historical cost.

Computer Hardware and Office Equipment:

When the company purchased computer hardware and office equipment, the invoice was $880,000. Due to Harrys skilful negotiation skill, it was able to reduce the price to $800,000. The seller (vendor) provided a further 1% discount if the entire amount was paid within 30 days. The company paid on the 29th day. DRLink recorded the asset as gross amount while the discount received was recorded as a contra expense. To encourage the company to purchase the latest model of printer/copier, the vendor gave Harry a $50,000 discount voucher on its next purchase of a similar machine. The company paid a total of $60,000 for transportation, installation and testing. During the initial installation setup training, one of the workers accidentally damaged the machine and it costs $25,000 to restore to its original condition. Also, during the initial installation and setup, part of the office including the software engineer department had to be shut down. According to Harry, the loss profit from the shutdown was $150,000. All of these items were expensed in 2018 when the purchase was made initially. At the time of purchase, it was estimated that the computer hardware and office equipment would have a useful life of 10 years with a residual value of 4 | P a g e $20,000. The company depreciates the assets based on double declining balance method. In January 2020, the company incurred a cost of $400,000 to upgrade the computer hardware with some key features that will improve efficiency. This expenditure was expensed in 2020. After the upgrade, Harry estimated that these improved features will save the company $50,000 per year for the next six years. On December 31, 2021, DRLink traded its one of the used laser printers for a newer model. The used laser printer has a book value of $200,000 and a fair value of $40,000. It was traded for a new model that had a list price of $305,000. In negotiation with the seller, a trade-in allowance of $50,000 was agreed on the used printer. Meg, the controller, recorded the allowance as a contra expense. The old laser was removed from the books and replaced with the new model.

QUESTION:

a) What IFRS accounting policies have been violated for each of the above transaction? Explain how the policies have been violated.

b) What implications they have on the Statement of Income, Statement of Retained Earnings and Balance Sheet.

c) What should have been the correct journal entries and calculations for these transactions in order to comply with IFRS? Provide correct adjusting journal entries and calculations to reflect a reliable, accurate financial statement for year-end 2021?