Llungby AB spent 1,000,000 krone in 2020 on the development of a new product. The company determined that 25 percent of this amount was incurred after the criteria in IAS 36 for capitalization as an intangible asset had been met. The newly developed product is brought to market in January 2021 and is expected to generate sales revenue for five years.
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- Llungby AB spent 1,000,000 krone in 2017 on the development of a new product. The company determined that 25 percent of this amount was incurred after the criteria in IAS 36 for capitalization as an intangible asset had been met. The newly developed product is brought to market in January 2018 and is expected to generate sales revenue for five years. Assume that a foreign company using IFRS is owned by a company using U.S. GAAP. Thus, IFRS balances must be converted to U.S. GAAP to prepare consolidated financial statements. Ignore income taxes. Required: Prepare journal entries for development costs for the years ending December 31, 2017, and December 31, 2018, under (1) IFRS and (2) U.S. GAAP. Prepare the entry(ies) that the U.S. parent would make on the December 31, 2017, and December 31, 2018, conversion worksheets to convert IFRS balances to U.S. GAAP.Mikkeli OY acquired a brand name with an indefinite life in 2021 for 43,600 markkas. At December 31, 2020, the brand name could be sold for 35,200 markkas, with zero costs to sell. Expected cash flows from the continued use of the brand are 45,870 markkas, and the present value of this amount is 34,200 markkas. Assume that Mikkeli OY is a foreign company using IFRS and is owned by a company using U.S. GAAP. Thus, IFRS balances must be converted to U.S. GAAP to prepare consolidated financial statements. Ignore income taxes. Required: Prepare journal entries for this brand name for the year ending December 31, 2020, under (1) IFRS and (2) U.S. GAAP. Prepare the entry(ies) that the U.S. parent would make on the December 31, 2020 conversion worksheet to convert IFRS balances to U.S. GAAP.Miracle Manufacturing Company Limited (Miracle) has the following transactions relating to its long life productive asset: On 1 February, 2020, the company purchased a sewing machine from Germany with an invoice price of $270,000, legal title fees of $2,500 and sales tax of $8,300. Miracle paid the total amount with $45,000 as down payment and the remaining balance with a Note Payable (ignore the interest expense). Miracle estimated the sewing machine would have a $21,600 residual value and a six-year useful life. On 31 March, 2020 (i.e. the company’s financial year-end), Miracle recorded the adjusting entry for depreciation using the straight line method to the nearest month. On 1 October, 2020, the company sold the sewing machine for $244,800 cash and paid off the Note Payable. Prepare the relevant journal entries for each of the above transactions. Assume the adjusting entries are performed annually on 31 March.
- On January 1, 2022, J Company acquired an intangible asset from a foreign company. The invoice price of the intangible was P5,000,000 subject to a 10% discount if acquired on a cash basis. J Company paid P500,000 import duties and professional fees of P50,000 in relation to its acquisition. At what amount should the intangible asset be initially recorded in the books of J Company? NOTE: ANSWER ONLYSullivan’s Island Company began operating a subsidiary in a foreign country on January 1, 2020, by investing capital in the amount of 60,000 pounds. The subsidiary immediately borrowed 140,000 pounds on a five-year note with 10 percent interest payable annually beginning on January 1, 2021. The subsidiary then purchased for 200,000 pounds a building that had a 10-year expected life and no salvage value and is to be depreciated using the straight-line method. Also on January 1, 2020, the subsidiary rented the building for three years to a group of local attorneys for 8,000 pounds per month. By year-end, rent payments totaling 80,000 pounds had been received, and 16,000 pounds was in accounts receivable. On October 1, 2020, 4,000 pounds was paid for a repair made to the building. The subsidiary transferred a cash dividend of 12,000 pounds back to Sullivan’s Island Company on December 31, 2020. The functional currency for the subsidiary is the pound. Currency exchange rates for 1 pound…Sullivan's Island Company began operating a subsidiary in a foreign country on January 1, 2020, by investing capital in the amount of 69,000 pounds. The subsidiary immediately borrowed 146,000 pounds on a five-year note with 10 percent interest payable annually beginning on January 1, 2021. The subsidiary then purchased for 215,000 pounds a building that had a 10-year expected life and no salvage value and is to be depreciated using the straight-line method. Also on January 1, 2020, the subsidiary rented the building for three years to a group of local attorneys for 8,200 pounds per month. By year-end, rent payments totaling 82,000 pounds had been received, and 16,400 pounds was in accounts receivable. On October 1, 2020, 4,200 pounds was paid for a repair made to the building. The subsidiary transferred a cash dividend of 13,900 pounds back to Sullivan's Island Company on December 31, 2020. The functional currency for the subsidiary is the pound. Currency exchange rates for 1 pound…
- Sullivan's Island Company began operating a subsidiary in a foreign country on January 1, 2020, by investing capital in the amount of 68,000 pounds. The subsidiary immediately borrowed 160,000 pounds on a five-year note with 8 percent interest payable annually beginning on January 1, 2021. The subsidiary then purchased for 228,000 pounds a building that had a 10-year expected life and no salvage value and is to be depreciated using the straight-line method. Also on January 1, 2020, the subsidiary rented the building for three years to a group of local attorneys for 8,200 pounds per month. By year-end, rent payments totaling 82,000 pounds had been received, and 16,400 pounds was in accounts receivable. On October 1, 2020, 2,800 pounds was paid for a repair made to the building. The subsidiary transferred a cash dividend of 11,900 pounds back to Sullivan's Island Company on December 31, 2020. The functional currency for the subsidiary is the pound. Currency exchange rates for 1 pound…Sullivan's Island Company began operating a subsidiary in a foreign country on January 1, 2020, by investing capital in the amount of 68,000 pounds. The subsidiary immediately borrowed 160,000 pounds on a five-year note with 8 percent interest payable annually beginning on January 1, 2021. The subsidiary then purchased for 228,000 pounds a building that had a 10-year expected life and no salvage value and is to be depreciated using the straight-line method. Also on January 1, 2020, the subsidiary rented the building for three years to a group of local attorneys for 8,200 pounds per month. By year-end, rent payments totaling 82,000 pounds had been received, and 16,400 pounds was in accounts receivable. On October 1, 2020, 2,800 pounds was paid for a repair made to the building. The subsidiary transferred a cash dividend of 11,900 pounds back to Sullivan's Island Company on December 31, 2020. The functional currency for the subsidiary is the pound. Currency exchange rates for 1 pound…Sullivan's Island Company began operating a subsidiary in a foreign country on January 1, 2020, by investing capital in the amount of 68,000 pounds. The subsidiary immediately borrowed 160,000 pounds on a five-year note with 8 percent interest payable annually beginning on January 1, 2021. The subsidiary then purchased for 228,000 pounds a building that had a 10-year expected life and no salvage value and is to be depreciated using the straight-line method. Also on January 1, 2020, the subsidiary rented the building for three years to a group of local attorneys for 8,200 pounds per month. By year-end, rent payments totaling 82,000 pounds had been received, and 16,400 pounds was in accounts receivable. On October 1, 2020, 2,800 pounds was paid for a repair made to the building. The subsidiary transferred a cash dividend of 11,900 pounds back to Sullivan's Island Company on December 31, 2020. The functional currency for the subsidiary is the pound. Currency exchange rates for 1 pound…
- Sullivan's Island Company began operating a subsidiary in a foreign country on January 1, 2020, by investing capital in the amount of 80,000 pounds. The subsidiary immediately borrowed 190,000 pounds on a five-year note with 8 percent interest payable annually beginning on January 1, 2021. The subsidiary then purchased for 270,000 pounds a building that had a 10-year expected life and no salvage value and is to be depreciated using the straight-line method. Also on January 1, 2020, the subsidiary rented the building for three years to a group of local attorneys for 8,500 pounds per month. By year-end, rent payments totaling 85,000 pounds had been received, and 17,000 pounds was in accounts receivable. On October 1, 2020, 3,400 pounds was paid for a repair made to the building. The subsidiary transferred a cash dividend of 11,750 pounds back to Sullivan's Island Company on December 31, 2020. The functional currency for the subsidiary is the pound. Currency exchange rates for 1 pound…Sullivan's Island Company began operating a subsidiary in a foreign country on January 1, 2020, by investing capital in the amount of 73,000 pounds. The subsidiary immediately borrowed 146,000 pounds on a five-year note with 10 percent interest payable annually beginning on January 1, 2021. The subsidiary then purchased for 219,000 pounds a building that had a 10-year expected life and no salvage value and is to be depreciated using the straight-line method. Also on January 1, 2020, the subsidiary rented the building for three years to a group of local attorneys for 8,100 pounds per month. By year-end, rent payments totaling 81,000 pounds had been received, and 16,200 pounds was in accounts receivable. On October 1, 2020, 3,000 pounds was paid for a repair made to the building. The subsidiary transferred a cash dividend of 13,200 pounds back to Sullivan's Island Company on December 31, 2020. The functional currency for the subsidiary is the pound. Currency exchange rates for 1 pound…Sullivan's Island Company began operating a subsidiary in a foreign country on January 1, 2020, by investing capital in the amount of 94,000 pounds. The subsidiary immediately borrowed 225,000 pounds on a five-year note with 9 percent interest payable annually beginning on January 1, 2021. The subsidiary then purchased for 319,000 pounds a building that had a 10-year expected life and no salvage value and is to be depreciated using the straight-line method. Also on January 1, 2020, the subsidiary rented the building for three years to a group of local attorneys for 8,850 pounds per month. By year-end, rent payments totaling 88,500 pounds had been received, and 17,700 pounds was in accounts receivable. On October 1, 2020, 4,100 pounds was paid for a repair made to the building. The subsidiary transferred a cash dividend of 11,575 pounds back to Sullivan's Island Company on December 31, 2020. The functional currency for the subsidiary is the pound. Currency exchange rates for 1 pound…