Question
Question 4 Part A: [4 marks] Duke Inc. decided to relocate its office headquarters to the City of Monrovia. The company purchased a building located
Question 4
Part A: [4 marks]
Duke Inc. decided to relocate its office headquarters to the City of Monrovia. The company purchased a building located in the center of the Monrovia City. The price of this building is $600,000. Duke Inc. paid only $420,000 for this purchase and the rest was paid by the City of Monrovia. The purchase was completed on November 1, 2020. The building has an expected useful life of 10 years and zero residual value. The condition for Monrovia Citys government grant is that Duke Inc. should stay in the city for at least four years. Duke Inc. took this deal with Monrovia City and planned to stay for six years.
Duke Inc. prepares its financial statements according to IFRS and uses the method of deferred recognition for government grants.
Required: (a) Prepare journal entries for the acquisition of the building on November 1, 2020 [2 marks]
(b) Prepare journal entries on December 31, 2020 [2 marks]
Part B: [6 marks]
On January 1, 2016, Synthetic Group purchased equipment for $350,000. This equipment is expected to have a 7-year useful life with no residual value. Synthetic uses the straight-line depreciation method for all depreciable assets. Synthetic chooses to revalue the equipment (i.e., revaluation model) and use the elimination method for the accumulated depreciation at the end of every year. Synthetic has the following information related to the equipment:
Dec.31, 2016 Fair Value $324,000
Dec.31, 2017 Fair Value $240,000
Required:
-
(a) Prepare journal entries related to the equipment at the end of 2016.(Note: journal entry for
purchase is not needed) [3 marks]
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(b) Prepare journal entries related to the equipment at the end of 2017 [3 marks]
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