Question 1

Bonita Landscaping Limited has determined that its lawn maintenance division is a cash-generating unit under IFRS. The carrying amounts of the divisions assets at December 31, 2017, are as follows:

Land............ $42,000

Building .......$72,000

Equipment... $47,000

Trucks ..........33,000

Total .........$194,000

The lawn maintenance division has been assessed for impairment and it is determined that the divisions value in use is $182,000, fair value less costs to sell is $149,000, and undiscounted future net cash flows is $218,000.

Question A. Determine if the cash-generating unit is impaired and prepare the journal entry, if any, to record the impairment at December 31, 2017, assuming that none of the individual assets in the division has a determinable recoverable amount.

Question B. Prepare the journal entry, if any, to record the impairment at December 31, 2017, assuming that the divisions only individual asset that has a determinable recoverable amount is the building, which has a fair value less costs to sell of $68,000.

Question C.. Assume that Bonita prepares financial statements under ASPE instead, and that the lawn maintenance division is an asset group. Determine if the asset group is impaired and prepare the journal entry, if any, to record the impairment at December 31, 2017, assuming that none of the individual assets in the division has a determinable recoverable amount.

Question 2

The information that follows relates to equipment owned by Pearl Limited at December 31, 2017:

Cost ...................................................$8,820,000

Accumulated depreciation to date.......... 980,000

Expected future net cash flows (undiscounted).....6,860,000

Expected future net cash flows (discounted, value in use) ....6,223,000

Fair value .......6,076,000

Costs to sell (costs of disposal) ....49,000

A. Assume that Pearl will continue to use this asset in the future. As at December 31, 2017, the equipment has a remaining useful life of four years. Pearl uses the straight-line method of depreciation.Assume that Pearl is a private company that follows ASPE.

1.Prepare the journal entry at December 31, 2017, to record asset impairment, if any.

2.Prepare the journal entry to record depreciation expense for 2018.

3.The equipments fair value at December 31, 2018, is $6.37 million. Prepare the journal entry, if any, to record the increase in fair value.

(1) December 31, 2017

(2) December 31, 2018

(3) December 31, 2018

B. Repeat the requirements in (A) above assuming that Pearl is a public company that follows IFRS.

(1) December 31, 2017

(2) December 31, 2018

(3)December 31, 2018