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IFRS Inc. is a publicly traded enterprise that elected to account for its patents using the Revaluation Model. The company's patents are traded on an
IFRS Inc. is a publicly traded enterprise that elected to account for its patents using the Revaluation Model. The company's patents are traded on an active market and qualify for this treatment. The company commenced operations on January 1st, Year 1. On that date, it bought $1 million worth of patents. The company depreciates all its patents using a declining balance rate of 20% per year. The company takes half a year's worth of amortization in the year of acquisition and half a year's worth of amortization in the year of disposal. During Year 2, the company purchased an additional \$1 million worth of patents. Also during Year 2, the company incurred legal fees of $200,000 in order to defend its Year 1 patents. These costs were incurred in early January of Year 2. The company succeeded in defending its lawsuit. All patents form part of the same asset class (pool). The company's patents had fair values as follows: December 31st, Year 1: 1,200,000 December 31st,, Year 2: 1,600,000 (includes all patents) The company has not resold any of its patents as of December 31m, Year 2. Required: Prepare all journal entries for IFRS Inc. for Years 1 and 2 as per the Revaluation Model. The company had no balance in its Revaluation Surplus-Patents account as of the start of Y ear 1 . company does not dispose of its Revaluation Surplus balances until its assets are sold
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