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The information that follows relates to equipment owned by Gaurav Limited at December 31 2014 Cost

The information that follows relates to equipment owned by Gaurav Limited at December 31, 2014: Cost ............................ $9,000,000 Accumulated depreciation to date ............... 1,000,000 Expected future net cash flows (undiscounted) ........... 7,000,000 Expected future net cash flows (discounted, value in use) ..... 6,350,000 Fair value ........................ 6,200,000 Costs to sell (costs of disposal) ................. 50,000 Assume that Gaurav will continue to use this asset in the future. As at December 3I, 20I4, the equipment has a remaining useful life of four years. Gaurav uses the straight-line method of depreciation. Instructions (a) Assume that Gaurav is a private company that follows A5PE. 1. Prepare the journal entry at December 31, 2014, to record asset impairment, if any. 2. Prepare the journal entry to record depreciation expense for 2015. 3. The equipment s fair value at December 31, 2015, is $6.5 million. Prepare the journal entry, if any, to record the increase in fair value. (b) Repeat the requirements in (a) above assuming that Gaurav is a public company that follows IFR5. (c) Referring to the qualitative characteristics identified in the conceprual framework for financial reporting (discussed in Chapter 2), discuss the differences between the cost recovery impairment model and the rational entity impairment model.

Apr 10 2020 Read more Less More

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