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On January 1, 2021, CAE Company acquires an asset for $450,000,000. It had to spend an additional $24,000,000 to prepare the asset for the managements
On January 1, 2021, CAE Company acquires an asset for $450,000,000. It had to spend an additional $24,000,000 to prepare the asset for the managements intended use. The assets retirement costs at the end of its useful life of 30 years are estimated to $130,000,000. The discount rate is 5%. The assets residual value is $80,000,000 and the straight-line method is used for depreciation. CAE Company applies IFRS.
Ignore decimals in your calculations.
Required-
- Prepare the journal entry to record the acquisition of the asset on January 1, 2021, assuming cash is used to pay for the assets related costs (other than the ARO).
- Prepare all required adjusting entries on December 31, 2021 and December 31, 2022.
- Assume that on January 1st, 2030, the assets retirement costs are re-estimated to $150,000,000, while the assets total useful life is shortened to 25 years. The discount rate to be used is 5.5%. Prepare the journal entry to record this change on January 1st, 2030 and the required adjusting entries on December 31, 2030.
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