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2 3 5 6 a 1 Question 2 - Property, Plant and Equipment (16 marks) **Please only enter your response in the blue cells. This is the only area that will be graded. 4 a) Asset Exchange (6 marks) In 2021, Malawi Inc exchanged equipment for a delivery truck. The equipment had been purchased for 7 $ 75,000 ten years ago and has since been fully depreciated. While the equipment was recently appraised at $ 21,000, 8. a reliable valuation for the truck was not available. This transaction has commercial substance, 9 10 Required: 11 1. Prepare the journal entry to record the exchange. (4 marks) 12 13 Date Account Titles Debit Credit 14 2021 15 16 17 18 19 20 21 22 2. If the above transaction did not have commercial substance, explain (without journal entries), how the transaction would 23 be different? (2 marks) 24 25 26 27 28 29 30 31. b) Asset Purchase (4 marks) 32 33 Chaz coporation made a lump sum purchase, which included land, a warehouse and an office building for $765,000. Data a 34 concerning the purchase is as follows: 35 36 Asset Current Assessed Value (5) 37 Land 300,000 38 Warehouse 200,000 39 Building 400,000 40 41 Required: 1 What amount will Chaz record for the land? (2 marks) 42 43 44 2. Explain why it is important to record the correct cost for each asset purchased in a lump sum purchase (2 marks) 45 46 48 -49 50 51 52 Extra workspace below (will not be graded) 53 54 55 56 57 58 59 60 8 889 c) Revaluation Model (6 marks) Wheel Inc owns equipment that was purchased on January 1, 2021, for $4,000,000. The following additional information is available Dec 31, 2021 - The book value (after recording depreciation for 2021) is $3,600,000 Dec 31, 2021 - The fair value is $4,100,000 The entry for depreciation in 2021 has already been recorded. The company uses the revaluation model (asset adjustment method) to account for its property, plant and equipment Required: Prepare the journal entries needed to adjust the asset's carrying amount to the fair value on December 31, 2021 in the space below. Date 2021 Account Titles Debit Credit 3