Question
You have just been hired as the new controller of Dunder Mifflin Inc. (DMI). DMI produces and sells office paper to mid-size businesses. DMI purchased
You have just been hired as the new controller of Dunder Mifflin Inc. (DMI). DMI produces and sells office paper to mid-size businesses. DMI purchased Sabre Paper Inc (SPI) in the current year. Your boss, Michael Scarn calls you in his office to discuss the December 31, 2020 financial statements with you under the IFRS framework. Michael Scarn: Hello CPA. As you know, you will need to help us finalize the financial statements to release to the shareholders. DMI purchased 100% of SPI on January 1, 2020. On January 2, 2020, SPI sold equipment to DMI at a gain of $100,000. As at December 31, 2020, the equipment has a useful life of 4 years. What adjustments are needed for the consolidated financial statements? Michael Scarn We have made several acquisitions in the past. The business as a whole has been operating well. I have therefore assessed there are no indicators of impairment for the Company, and we have not performed an impairment test. Also, I think as a whole weve improved so much, Ive reversed the impairment loss we recorded last year
Required: Please provide the relevant accounting treatment for the transactions above and identify errors Michael has made in his analysis. If there are options available for the accounting treatment, please describe what they are and which one you would recommend. Your discussions should use the case facts and the appropriate technical accounting guidance.
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