Parnell Company acquired construction equipment on January 1, 2023, at a cost of $77,000. The equipment was expected to have a useful life of five years and a residual value of $14,000 and is being depreciated on a straight-line basis. On January 1, 2024, the equipment was appraised and determined to have a fair value of $73,600, a salvage value of $14,000, and a remaining useful life of four years. In measuring property, plant, and equipment subsequent to acquisition under IFRS, Parnell would opt to use the revaluation model in IAS 16. Assume that Parnell Company is a U.S.-based company that is issuing securities to foreign investors who require financial statements prepared in accordance with IFRS. Thus, adjustments to convert from U.S. GAAP to IFRS must be made. Ignore income taxes. Required: Prepare journal entries for this equipment for the years ending December 31, 2023, and December 31, 2024, under (1) U.S. GAAP and (2) IFRS. Prepare the entry(ies) that Parnell would make on the December 31, 2024, conversion worksheet to convert U.S. GAAP balances to IFRS.
Parnell Company acquired construction equipment on January 1, 2023, at a cost of $77,000. The equipment was expected to have a useful life of five years and a residual value of $14,000 and is being depreciated on a straight-line basis. On January 1, 2024, the equipment was appraised and determined to have a fair value of $73,600, a salvage value of $14,000, and a remaining useful life of four years. In measuring property, plant, and equipment subsequent to acquisition under IFRS, Parnell would opt to use the revaluation model in IAS 16. Assume that Parnell Company is a U.S.-based company that is issuing securities to foreign investors who require financial statements prepared in accordance with IFRS. Thus, adjustments to convert from U.S. GAAP to IFRS must be made. Ignore income taxes. Required: Prepare journal entries for this equipment for the years ending December 31, 2023, and December 31, 2024, under (1) U.S. GAAP and (2) IFRS. Prepare the entry(ies) that Parnell would make on the December 31, 2024, conversion worksheet to convert U.S. GAAP balances to IFRS.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Parnell Company acquired construction equipment on January 1, 2023, at a cost of $77,000. The equipment was expected to have a useful life of five years and a residual value of $14,000 and is being
Assume that Parnell Company is a U.S.-based company that is issuing securities to foreign investors who require financial statements prepared in accordance with IFRS. Thus, adjustments to convert from U.S. GAAP to IFRS must be made. Ignore income taxes.
Required:
-
Prepare
journal entries for this equipment for the years ending December 31, 2023, and December 31, 2024, under (1) U.S. GAAP and (2) IFRS. -
Prepare the entry(ies) that Parnell would make on the December 31, 2024, conversion worksheet to convert U.S. GAAP balances to IFRS.
REQUIRED A:
- Record the entry for the surplus on revaluation of equipment due to conversion from U.S. GAAP to IFRS.
Note: Enter debits before credits.
| 1. |
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- Record the entry for depreciation expense as per U.S. GAAP.
Note: Enter debits before credits.
| 2. |
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- Record the entry for depreciation expense as per IFRS.
Note: Enter debits before credits.
| 3. |
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- Record the entry for the revaluation of equipment as per IFRS.
Note: Enter debits before credits.
| 4. |
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- Record the entry for depreciation expense as per IFRS.
Note: Enter debits before credits.
| 5. |
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REQUIRED B:
- Record the entry for recording profit on revaluation of equipment due to conversion from U.S. GAAP to IFRS.
Note: Enter debits before credits.
| 1. |
|
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- Record the entry for additional depreciation expense on revaluation of equipment due to conversion from U.S. GAAP to IFRS.
Note: Enter debits before credits.
| 2. |
|
|
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