Entity A hires out motor trucks to its part-time drivers to generate revenue. The draft accounts at the end of the reporting period of 31 December 2017 included the motor trucks which were bought on 1 January 2015. Their economic life is 6 years. These motor trucks were purchased from Entity B on credit. The listed price was $9,859,375. Entity B always provides a trade discount of 4% to Entity A due to its good business relationship. Under the contract, it will be settled by cheque on 15 January 2015 and 15 March 2015 by two payments of 60% and 40% respectively. Entity A is also responsible for disposing these motor trucks to the scrap yard for recycling after 6 years. The removal cost of $106,600 will be incurred on 31 December 2020. The delivery cost of $25,028 was incurred on 1 January 2015 by paying a cheque to Entity C.

On 31 December 2017, due to the world trade war, Entity A expected the market would move downward starting from 1 January 2018. On one hand, Entity A estimated that it was able to generate cash inflows of $1,560,000, $1,200,000 and $3,100,200 in the Year of 2018, 2019 and 2020 respectively. It will then be scrapped on 31 December 2020. On the other hand, these motor trucks could be sold immediately on 31 December 2017 for $4,600,000 and selling costs of $45,600 were also incurred.

On 31 December 2018, Entity A expected the market would move upward again because of quite a lot of positive news of the world trade war were observed recently. Entity A estimated that it was able to generate $1,805,000 and $4,400,000 cash in the Year of 2019 and 2020 respectively. It will then be scrapped on 31 December 2020. Furthermore, these motor trucks could be sold immediately on 31 December 2018 for $5,600,000 and selling costs of $49,600 were also incurred.

On 31 December 2019, Entity A estimates no further impairment loss should be charged.

Due to a shortage of cash, on 30 June 2020, Entity A sold theses motor trucks to Entity D which is an independent third party. Entity D paid the agreed price of $750,000 by a post-dated cheque of 1 July 2020 on 30 June 2020. Entity A deposited the cheque on 2 July 2020.

Entity A adopts a straight-line method for depreciation of motor trucks as the corporate accounting policy. Discount rates are 9.75%, 12.00% and 10.00% for applying on 1 January 2015, 31 December 2017 and 31 December 2018 respectively.

The end of the reporting period is 31 December.

REQUIRED:

According to HKAS 36 Impairment of Assets and relevant accounting standards, prepare journal entries to recognise the transactions of Entity A From 1 January 2015 to 2 July 2020.

ACCOUNT NAMES FOR INPUT:

| Plant | Motor trucks | Machine | Land | Building | Bank | Payable | Receivable | No entry |

| Retained earnings | Other income | Other expense |Interest expense | Interest revenue |

| Depreciation | Accum. depreciation | Impairment loss | Reversal of impairment loss |

| Restoration liability | Loss on disposal | Gain on disposal | Revaluation surplus | Revaluation deficit |

ANSWERS:

Journal Entries:

Date	Account Name	Debit ($)	Credit ($)	Hints For Items If Necessary
1-Jan-15
				Related to Entity B. Judge Dr/Cr side.
				Related to Entity C. Judge Dr/Cr side.
				Judge Dr/Cr side.
15-Jan-15
15-Mar-15
31-Dec-15
31-Dec-15
31-Dec-16
31-Dec-16
31-Dec-17
31-Dec-17
31-Dec-17
31-Dec-18
31-Dec-18
31-Dec-18
31-Dec-19
31-Dec-19
30-Jun-20
30-Jun-20
30-Jun-20				Related to Entity D.
				Judge Dr/Cr side.
				Judge Dr/Cr side.
				P/L Item. Judge Dr/Cr side.
				Judge Dr/Cr side.
30-Jun-20
2-Jul-20