Problem 3

Charlie Company leases the third and fourth floors of a 20-story building under an operating lease that expires on December 31, 2008.

On December 1^st, 2003, in conjunction with the downsizing of its headquarters staff, Charlie decides to cease using the fourth floor effective January 1^st, 2004.

Based on market rentals, Charlie determines that it could sublease the fourth floor for $100,000 per year for the remaining five years, but decides not to do so on the cease-use date. The rent allocable to the fourth floor is $150,000 a year. Credit adjusted Risk free rate is 6%.

Required:

2. In reporting to its U.K. -parent under IFRS, how should Charlie Co.

account for the restructuring program for the year ended December

31, 2003?

2b. Provide all necessary journal entries for Dec 1st, 2003, January 1^st, 2004

and December 31, 2004.