Zhang Zinc Mines Ltd. decided on 1 April 20X8 to dispose of one of its mining properties in northern Ontario. The property consists of mineral rights (an intangible asset) and the on-site mining equipment. The mineral rights have a carrying value of $1,320,000 while the mining equipment has a net book value (after depreciation) of $560,000. Due to the currently depressed value of zinc on the world market, the value of the mineral rights is estimated to be $880,000. The recoverable amount of the mining equipment is very low, no more than $132,000 because most of the equipment is fixed to the property and cannot be moved at any reasonable cost. Zhangs Board of Directors has launched an active search for a resource company (or a speculator) to buy the mine; the board is confident of finding a buyer in no more than one year. As a public company traded on the TSX, Zhang must provide quarterly statements to the shareholders.

Journal entry worksheet

Note: Enter debits before credits.

Date	General Journal	Debit	Credit
1 April 20X8

Salamander Inc. is a food processing company that operates divisions in three major lines of food products: cereals, frozen fish, and candy. On 13 September 20X1, the Board of Directors voted to put the candy division up for sale. The candy divisions operating results had been declining for the past several years due to intense competition from large international players such as Nestl and Cadbury. The Board hired the consulting firm Atelier LLP to conduct a search for potential buyers. The consulting fee was to be 5% of the value of any sale transaction. By 31 December 20X1, Atelier had found a highly interested buyer for the candy division, and serious negotiations were underway. The buyer was a food conglomerate based in Brazil; it offered $5.7 million cash. On 25 February 20X2, after further negotiations, the Salamanders board accepted an enhanced Brazilian offer to buy the division for $6.0 million. The Salamander shareholders approved the sale on 5 March 20X2. The transfer of ownership took place on 31 March 20X2. Salamanders income tax rate is 20%. Other information is as follows (before tax, in thousands of dollars):

	13 September 20X1								31 December 20X1
	Book Value				Fair Value				Fair Value
Candy divisions net assets:
Current assets	$	1,010			$	880			$	860
Property, plant, and equipment (net)		5,600				4,100				4,300
Current liabilities		(950	)			(950	)			(950	)
	$	5,660			$	4,030			$	4,210
Net earnings (loss) of the candy division:
13 September to 31 December 20X1										570
1 January to 31 March 20X2										(680	)

Prepare whatever journal entries are appropriate at 13 September 20X1, 31 December 20X1, 25 February 20X2, 5 March 20X2, and 31 March 20X2.

• 1 13 September 20X1

  Record the entry to write down capital asset to fair value, Income tax and record impairment loss.

• 2 13 September 20X1

  Record the entry to reclassify assets and liabilities as held for sale.

• 3 31 December 20X1

  Record the partial recovery in fair value less costs to sell for asset group, partially off setting the operating loss of $570.

• 4 25 February 20X2

  Record the acceptance of an enhanced brazilian offer to buy the division.

• 5 5 March 20X2

  Record the entry for the approval given by the shareholders for the sale.

• 6 31 March 20X2

  Record the entry for the final sale.