Concept explainers
a.
Determine the appropriate accounting for this equipment for the years ending December 31, 2017, and December 31, 2018, under (1) IFRS and (2) U.S. GAAP.
a.
Explanation of Solution
(1)
U.S. GAAP:
The entry to record equipment under U.S. GAAP:
The equipment is not recorded under U.S. GAAP as the revaluation model is not used under same.
Computation of value of equipment as on December 31, 2017:
Computation of value of equipment as on December 31, 2018:
(2)
IFRS:
The entry to record sale and leaseback under IFRS:
Date | Account Title and Explanation | Post ref. | Debit (pesos) | Credit (pesos) |
1/1/2018 | 50,000 | |||
Equipment | 50,000 | |||
(being equipment reduced for accumulated depreciation) | ||||
1/1/2018 | Equipment | 90,000 | ||
Revaluation surplus | 90,000 | |||
(being equipment revalued) | ||||
12/31/2018 | Depreciation expense | 60,000 | ||
Accumulated Depreciation on equipment | 60,000 | |||
(being depreciation recorded after revaluation) |
Table: (1)
b.
Prepare the entry 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.
b.
Explanation of Solution
The entry that Company would make on December 31, 2017:
Date | Account Title and Explanation | Post ref. | Debit (pesos) | Credit (pesos) |
12/31/2018 | Revaluation surplus | 90,000 | ||
Accumulated | 40,000 | |||
Equipment | 40,000 | |||
Depreciation expense | 10,000 | |||
(being revaluation surplus and depreciation recorded) |
Table: (2)
Partial Conversion worksheet, December 31, 2017 (Revaluation of equipment) | ||||
Particulars | U.S. GAAP | Debit | Credit | IFRS |
Depreciation expense | $60,000 | $10,000 | $50,000 | |
Net income | $60,000 | $50,000 | ||
| $50,000 | $50,000 | ||
Retained earnings on 12/31/2017 | $110,000 | $100,000 | ||
Revaluation surplus | ($90,000) | $90,000 | $0 | |
AOCI on 01/01/2017 | $0 | $0 | ||
AOCI on 12/31/2017 | ($90,000) | $0 | ||
Cash | ($500,000) | ($500,000) | ||
Equipment | $540,000 | $0 | $40,000 | $500,000 |
Accumulated Depreciation on equipment | ($60,000) | $0 | $40,000 | ($100,000) |
Total assets | ($20,000) | ($100,000) | ||
Total Liabilities | $0 | $0 | ||
Retained earnings on 12/31/2017 | $110,000 | $0 | ||
AOCI, 31/12/2017 | ($90,000) | $0 | ||
Total liabilities and Equity | $20,000 | $90,000 | $90,000 | $100,000 |
Table: (3)
Date | Account Title and Explanation | Post ref. | Debit (pesos) | Credit (pesos) |
AOCI as on 01/01/2018 | 90,000 | |||
Equipment | 40,000 | |||
Accumulated Depreciation on equipment | 30,000 | |||
Retained Earnings as on 01/01/2018 | 20,000 |
Table: (4)
Partial Conversion worksheet, December 31, 2018 (Revaluation of equipment) | ||||
Particulars | U.S. GAAP | Debit | Credit | IFRS |
Depreciation expense | $60,000 | $10,000 | $50,000 | |
Net income | $60,000 | $50,000 | ||
Retained earnings on 01/01/2017 | $110,000 | $10,000 | $100,000 | |
Retained earnings on 12/31/2017 | $170,000 | $150,000 | ||
AOCI on 01/01/2017 | ($90,000) | $90,000 | $0 | |
AOCI on 12/31/2017 | ($90,000) | $0 | ||
Cash | ($500,000) | ($500,000) | ||
Equipment | $540,000 | $40,000 | $500,000 | |
Accumulated Depreciation on equipment | ($120,000) | $30,000 | ($150,000) | |
Total assets | ($80,000) | ($150,000) | ||
Total Liabilities | $0 | $0 | ||
Retained earnings on 12/31/2017 | $170,000 | $150,000 | ||
AOCI, 31/12/2017 | ($90,000) | $0 | ||
Total liabilities and Equity | $80,000 | $90,000 | $90,000 | $150,000 |
Table: (5)
Want to see more full solutions like this?
Chapter 11 Solutions
ADV. ACCT CONNECT STAND ALONE
- Bonita Industries purchased a new machine on May 1, 2012 for $561600. At the time of acquisition, the machine was estimated to have a useful life of ten years and an estimated salvage value of $30000. The company has recorded monthly depreciation using the straight-line method. On March 1, 2021, the machine was sold for $67800. What should be the loss recognized from the sale of the machine?arrow_forwardBabcock Company purchased a piece of machinery for $30,000 on January 1, 2022, and has been depreciating the machine using the sum-of-the-years'-digits method based on a five-year estimated useful life and no salvage value. On January 1, 2024, Babcock decided to switch to the straight-line method of depreciation. The salvage value is still zero and the estimated useful life is changed to a total of six years from the date of purchase. Ignore income taxes. Required: 1. Prepare the appropriate journal entry, if any, to record the accounting change. 2. Prepare the journal entry to record depreciation for 2024. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Prepare the appropriate journal entry, if any, to record the accounting change. Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field. View transaction list Journal entry worksheet < 1 Record the accounting change.arrow_forwardLindy Company acquired a machine at a cost of $530,000 on 1 August 2018. The machine had an estimated residual value of $50,000 and an estimated useful life of 8 years. Lindy uses straight-line method of depreciation. The financial year of the company ends on 31 March of each year. On 31 March 2020, the machine was accidentally damaged. It can still operate though at a reduced capacity. It was then expected that the remaining useful life will only be 3 years. The fair value less costs to sell of the machine at 31 March 2020 was $190,000. In addition, it is estimated that the net cash inflows from the machine will be: Year ended 31 March 2021 $155,000 Year ended 31 March 2022 120,000 Year ended 31 March 2023 80,000 Estimated residual value on 31 March 2023 5,000 Lindy Company’s cost of capital is 10%. $155,000 120,000 80,000 5,000 Required: (a) Prepare journal entries to record depreciation expenses on the machine for the years ended 31 March 2019…arrow_forward
- Awni Company purchased a new machine on May 1, 2010 for €44,000. At the time of acquisition, the machine was estimated to have a useful life of ten years and an estimated salvage value of €2,000. The company has recorded monthly depreciation using the straight-line method. On March 1, 2019, the machine was sold for €6,000. What should be the loss recognized from the sale of the machine?arrow_forwardQRS ltd purchased a machine on 1 July 2014 for GHS500,000. It is being depreciated on a straight line basis over its expected life of ten years. Residual value is estimated at GHS20,000. On 1 January 2015, following a change in legislation, QRS ltd fitted a safety guard to the machine. The safety guard cost GHS25,000 and has a useful life of five years with no residual value. What is the depreciation charge for this machine in the year ended 31 March 2015?arrow_forwardAntigua Company purchased a depreciable asset for $45,000 on October 1, 2015. The estimated salvage value is $9,000, and the estimated useful life is 6 years. The straight-line method is used for depreciation. What is the book value on July 1, 2017 when the asset is sold?arrow_forward
- Nanki Corporation purchased equipment on January 1, 2014, for $616,000. In 2014 and 2015, Nanki depreciated the asset on a straight-line basis with an estimated useful life of eight years and a $12,000 residual value. In 2016, due to changes in technology, Nanki revised the useful life to a total of 5 years with no residual value. What depreciation would Nanki record for the year 2016 on this equipment? (Round your answer to the nearest dollar amount.) Multiple Choice $100,667. None of these answer choices are correct. $100,954. $155,000.arrow_forwardVaughn Manufacturing purchased a new machine on May 1, 2012 for $566400. At the time of acquisition, the machine was estimated to have a useful life of ten years and an estimated salvage value of $20400. The company has recorded monthly depreciation using the straight-line method. On March 1, 2021, the machine was sold for $81600. What should be the loss recognized from the sale of the machine? $2500. $20400. $22900. $0.arrow_forwardOn January 1, 2007, Flax Co. purchased a machine for 528,000 and depreciated it by the straight-line method using an estimateduseful life of eight years with no salvage value. On January 1, 2010, Flax determined that the machine had a useful life of six years from the date of acquisition and will have a salvage value of 48,000. An accounting change was made in 2010 to reflect these additional data. The accumulated depreciation for this machine should have a balance at December 31, 2010 ofa.292,000b.308,000c.320,000d.352,000arrow_forward
- BLACK JACK Company purchased an automotive equipment on June 30, 2018 for $3,000,000. At the date of acquisition, the equipment had a life of six years with no salvage value. The equipment is being depreciated on a straight-line basis. On October 1, 2021, BLACK JACK determined that the equipment had a remaining useful life of five years.arrow_forwardShanahan Construction purchased a crane on January 1, 2015, for $102,750. At the time of purchase, the crane was estimated to have a life of 6 years and a residual value of $6,750. In 2017, Shanahan determined that the crane had a total useful life of 7 years and a residual value of $4,500. If Shanahan uses the straight-line method of depreciation, what will be the 2017 depreciation expense for the crane? a.$13,250 b.$9,464 c.$16,000 d.$8,000arrow_forwardDiamond Ltd acquired an item of polishing equipment on 1 July 2015 for $440,000. The equipment is expected to have a useful life of 10 years and the straight-line method of depreciation is to be used. It has salvage value of $40,000. On 1 July 2017, the equipment is deemed to have a fair value of $424,000 and revaluation is undertaken in accordance with the Diamond Ltd policy of measuring property, plant and equipment at fair value. The asset is still usable for next 8 years but the salvage value is determined to be zero. The asset is sold for $356,000 on 1 July 2019. Required: Provide the journal entries necessary at the following dates to account for the above transactions and events. (Ignore narrations). Show your workin • 01/07/2015 • 01/07/2017 • 01/07/2019arrow_forward
- AccountingAccountingISBN:9781337272094Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.Publisher:Cengage Learning,Accounting Information SystemsAccountingISBN:9781337619202Author:Hall, James A.Publisher:Cengage Learning,
- Horngren's Cost Accounting: A Managerial Emphasis...AccountingISBN:9780134475585Author:Srikant M. Datar, Madhav V. RajanPublisher:PEARSONIntermediate AccountingAccountingISBN:9781259722660Author:J. David Spiceland, Mark W. Nelson, Wayne M ThomasPublisher:McGraw-Hill EducationFinancial and Managerial AccountingAccountingISBN:9781259726705Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting PrinciplesPublisher:McGraw-Hill Education