Question 3: Non-monetary Exchange (12 marks)

Nimble Deliveries Inc. exchanged a large delivery truck (fair value of $150,000; original cost of $425,000; accumulated depreciation of $260,000) for a different truck that belonged to Long-Distance Movers. The truck from Long-Distance Movers has a fair value of $180,000, original cost of $500,000, and accumulated deprecation of $305,000. All amounts have been updated to the date of the exchange.

Required:

Prepare the journal entry for Nimble Deliveries Inc. for this exchange, assuming:

1. The exchange has commercial substance
2. The exchange lacks commercial substance

Note: You do not need to provide the entries for Long-Distance Movers.

Question 4: Impairment (8 marks)

Sage Corporation's balance sheet includes the following asset:

Equipment: $275,000

Accumulated depreciation: 85,000

Sage was notified of a significant change in the technology used to power the equipment and decided to test for impairment. Sage obtained the following data:

Future cash flows (undiscounted): $125,000

Value in use (discounted): 120,000

Fair value: 160,000

Selling costs: 8,000

Required:

Assuming Sage follows ASPE, calculate if the asset is impaired, and prepare any journal entries required. Show your calculations.