Oshawa Ltd. is a manufacturing company. You have been asked to help account for some of Oshawa’s capital asset activities. Generally, Oshawa uses cost as the basis for valuing its capital assets and all assets are depreciated on a straight-line basis. 

For each situation prepare all journal entries required . The appropriate discount rate for Oshawa is 18%. Provide an explanation for how you accounted for the situation, state any assumptions you make, and show all supporting calculations.

a) One of Oshawa’s production lines is aging and evidence suggests that it’s impaired. That line has been declining in efficiency and output in recent years due to changing technology and consumer preferences. This line is considered a cash generating unit. The carrying amount of the production line at the beginning of 2021 was $2,740,000 (cost: $7,200,000; accumulated depreciation: $5,460,000). When acquired the line was estimated to have a 20-year useful life. The residual value is estimated to be $400,000. Management estimates that the line will generate net cash flows of about $520,000 per year for each year of its remaining six-year life. Management thinks it will be able to sell the line in six years for scrap and receive about $150,000. Management believes it could sell the line in the open market today for about $2,500,000. If it did sell the line now it would incur selling costs of about $500,000. Assume that Oshawa uses IFRS.

b) Examine information is a) above. Assess the impairment of the line assuming ASPE is used.

c) In 2021 Oshawa installed a state of the art robotic control system in one of its existing buildings. The robotic control system is expected to have a useful life of 10 years and has no residual value. Oshawa hired a consultant to assist it with the design and acquisition of the system. The consultant located a vendor and helped determine the appropriate specifications. The consultant received $300,000 from Oshawa for her services. The vendor sold the system to Oshawa for $3.5 million. The vendor agreed to accept a down payment of $500,000 and the remainder in 12 months. Had Oshawa paid cash at the time of purchase the cost would have been $3.3 million. Delivery and installation of the system cost an additional $275,000. In addition, Oshawa’s own employees did work to prepare the building. The employees’ wages for the work done was $75,000. The supervisor of the project reported that the workers assigned to filtration project were idle for 25% of the time because of problems with the people actually doing the installation. New wiring was installed in the building at a cost of $75,000 to allow the machine to safely operate. There was also accidental damage during installation that cost $23,000 to repair. Assume Oshawa uses IFRS

d) Oshawa has identified about $430,000 of assets that it no longer requires. Assume that Oshawa uses IFRS.

i) $100,000 of the assets (cost $325,000, accumulated depreciation $225,000) is equipment that can’t be used and has no resale value. The equipment has placed outside, in the back of the building.

ii) On September 1, 2021 the company sold $125,000 of the assets (cost $500,000, accumulated depreciation $375,000) for $195,000 cash. Cost of dismantling and disposing of the equipment was $15,000.

iii) The remaining assets (cost $410,000, accumulated depreciation $205,000) have been taken out of use and are up for sale. Management expects the remaining assets to be sold within the next month or two. Management estimates the fair value of these assts to be about $50,000 and selling them would cost $5,000