Exercise Jupiter 1

Jupiter Corp. Prepares its financial statements under IFRS During the Year 2020:

The company begins operations on January 1, 2020. The company is started by issuing 500,000 shares of common stock for $50,000,000 ($1 Par value stock)

The company immediately purchases $900,000 in inventory for cash and sells $500,000 of this inventory to customer #1 for $700,000 on credit.

On January 1st, the company purchases an apartment building (paid in cash) as an investment that it will lease to an unrelated third parties. The building costs $7,000,000 and has a 25 year estimated life with a $2,000,000 estimated salvage value. Jupiter immediately finds 3 tenants who each pay $10,000 refundable security deposits (refundable at the end of the lease terms in 2021 and beyond if there are no damages to the property). The least terms and conditions are as follows: (assume lease terms begin January 1, 2020)

o Tenant 1 Pays $60,000 (entire rent in advance) for a two year lease term

o Tenant 2 Pays 2,000 on the 1st of each month for a one year lease term. All payments have been collected as of 12/31/20. (Since we are only producing year end statements record all the cash received during the year in January and then adjust the unearned revenue account as an AJE at year end)

o Tenant 3 Signs a lease for 2 years ($48,000 total) and pays $12,000 in advance cash and issues a promissory note for the balance of $36,000 plus interest (with 5% simple interest, not compounding) to be paid January 1, 2021.

The company purchases a machine for $900,000 cash on January 1st and depreciates it over 9 years (depreciation is recorded straight line at year end and there is no salvage value)

On June 1, customer #1 pays us $200,000 of the amount due.

On June 1, Jupiter purchases with cash 100 Bitcoin for $11,000 per Bitcoin (no transaction costs). The Bitcoin will be held indefinitely to be used for certain future International transactions.

During June, $300,000 dollars of research and development costs are incurred. $70,000 of this amount has not been paid as of yearend (i.e. remains a payable). 40% of these costs are considered to meet the criteria of a deferred development asset under IFRS.

In November, a customer gives Jupiter $200,000 in cash for product that will be delivered in 2021.

On December 1, 2020, the company sells inventory costing $200,000 to a customer in Europe for 210,000 Euros on credit to be collected 1/31/21. The Euro spot rate on 12/1/20 date is 1.14. The Euro spot rate at 12/31/20 is 1.16

At year 2020 the following values are associated with the Machine:

Undiscounted cash flows: $850,000

Selling Price: $750,000

Selling Costs $25,000

PV of future cash flows $675,000

The market price for Bitcoin at 12/ 31/20 is $28,000

The fair value of the apartment building at 12/31/20 is $8,000,000

Income / Rent earned from the apartment building should be recorded as Other Income

Required: Using a separate Excel Spreadsheet, journalize the transactions and create a Balance Sheet and Income Statement for year-end 2020. NOTE: Differences between IFRS and GAAP will occur in: 1) The valuation of the investment property (Apartment) 2) Impairment of the Machine