Sugden Limited purchased land and a building on August 1, 2011, for $595,000. The company paid $200,000 in cash and signed a 5% bank loan payable for the balance. The bank loan is due April 1, 2013. At that time, Sugden estimated that the land was worth $340,000 and the building $255,000. The building was estimated to have a 40-year useful life with a $15,000 residual value. The company has a December 31 year end and uses the straight-line depreciation method for buildings. The following are related transactions and adjustments during the next three years:

2011

Dec. 31 Recorded the annual depreciation.

31 Paid the interest owing on the bank loan.

2012

May 21 Paid $2,000 for repairs to the roof.

Dec. 31 Recorded the annual depreciation.

31 Paid the interest owing on the bank loan.

31 The land and building were tested for impairment. The land had a recoverable amount of $280,000 and the building $249,000.

2013

Mar. 31 Sold the land and building for $480,000 cash-$250,000 for the land and $230,000 for the building.

Apr. 1 Paid the bank loan and interest owing.

Instructions

(a) Record the above transactions and adjustments for each year.

(b) What factors may have been responsible for the impairment on December 31, 2012?

(c) Assume instead that the company sold the land and building on March 31, 2013, for $650,000 cash-$390,000 for the land and $260,000 for the building. Record the journal entry (or entries) to record the sale.

(d) Now assume that the land and building were not sold in 2013 and that by the end of December 31, 2013, the fair values of each were $390,000 and $260,000, respectively. Could the impairment loss recorded in 2012 be reversed under IFRS if the cost model were used? Could it be reversed if the revaluation model were used? Could it be reversed under ASPE?