Question
The information that follows relates to equipment owned by Waterway Limited at December 31, 2020: Cost $9,720,000 Accumulated depreciation to date 1,080,000 Expected future net
The information that follows relates to equipment owned by Waterway Limited at December 31, 2020:
Cost | $9,720,000 | |
Accumulated depreciation to date | 1,080,000 | |
Expected future net cash flows (undiscounted) | 7,560,000 | |
Expected future net cash flows (discounted, value in use) | 6,858,000 | |
Fair value | 6,696,000 | |
Costs to sell (costs of disposal) | 54,000 |
Assume that Waterway will continue to use this asset in the future. As at December 31, 2020, the equipment has a remaining useful life of four years. Waterway uses the straight-line method of depreciation.
Assume that Waterway 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 $7.02 million. Prepare the journal entry, if any, to record the increase in fair value. |
No. | Date | Account Titles and Explanation | Debit | Credit |
---|---|---|---|---|
(1) | December 31, 2020 | Loss on Impairment | 1,944,000 |
|
Accumulated impairment |
| 1,944,000 | ||
(2) | December 31, 2021 | Depreciation expense | 1,674,000 |
|
Accumulated depreciation |
| 1,674,000 | ||
(3) | December 31, 2021 | No entry | 0 |
|
No entry |
| 0 |
Repeat the requirements in (a) above assuming that Waterway is a public company that follows IFRS.
No. | Date | Account Titles and Explanation | Debit | Credit |
---|---|---|---|---|
(1) | December 31, 2020 | Loss on impairment | 1,782,000 |
|
accumulated impairment |
| 1,782,000 | ||
(2) | December 31, 2021 | depreciation expense | 1,714,500 |
|
accumulated depreciation |
| 1,714,500 | ||
(3) | December 31, 2021 | accumulated impairment |
|
|
|
|
|
Which answer from 3?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started