Part I

Enjoy the Exam Inc. owns building with a cost of $200,000 and estimated useful life of five years. Accordingly, depreciation of $ 40,000 per year is anticipated. After two years, Enjoy the Exam Inc. obtains market information suggesting that the current fair value of the buildings is $ 300,000 and decided to write the building up to fair value of $ 300,000. There are two approaches to apply the revaluation model in IAS 38; by adjusting the gross book value of the asset and accumulated depreciation, or by eliminating accumulated depreciation and adjusting the gross book value of the asset to equal revalued amount.

1. What are the necessary journal entries under each of the two options?

Part II

On January 1, 2014, Enjoy the Exam Inc. bought an equipment for around $100,000. The estimated life of the equipment life of the equipment at the time of purchase was 10 years, the depreciation method used is the straight-line method. Technological innovations take place in the industry in which the company operates at the end of year 2017. On December 31, 2017, the company generates a present value of $55,000 and the net selling price in the equipment market is $57,000.

At the end of December 2019, it is discovered that the technological innovations related to this equipment are not effectives first expected. Quick estimates the following for this piece of equipment at the end December 2019.

1. Net selling price$62,000
2. Present value of the future cash flows from continued use$54,000
3. Expected future undiscounted cash flows from continued use$60,000

1/ Discuss whether the company must conduct an impairment test on this piece of equipment at December 31,2017.

2/ Determine the amount at which the company should carry this piece of equipment on its balance sheet at December 31, 2017; December 31, 2018, and December 31,2019. Prepare any journal entries.