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The information that follows relates to equipment owned by Bonita Limited at December 31, 2020: Cost $6,660,000 Accumulated depreciation to date 740,000 Expected future net
The information that follows relates to equipment owned by Bonita Limited at December 31, 2020:
Cost | $6,660,000 | |
Accumulated depreciation to date | 740,000 | |
Expected future net cash flows (undiscounted) | 5,180,000 | |
Expected future net cash flows (discounted, value in use) | 4,699,000 | |
Fair value | 4,588,000 | |
Costs to sell (costs of disposal) | 37,000 |
Assume that Bonita will continue to use this asset in the future. As at December 31, 2020, the equipment has a remaining useful life of four years. Bonita uses the straight-line method of depreciation.
Assume that Bonita is a private company that follows ASPE.
1. | Prepare the journal entry at December 31, 2020, to record asset impairment, if any. | |
2. | Prepare the journal entry to record depreciation expense for 2021. | |
3. | The equipments fair value at December 31, 2021 is $4.81 million. Prepare the journal entry, if any, to record the increase in fair value. |
Repeat the requirements in (a) above assuming that Bonita is a public company that follows IFRS.
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