Question
In: Accounting
Cougar Corp.'s balance sheet as of December 31, 2020 includes an item of equipment with an...
Cougar Corp.'s balance sheet as of December 31, 2020 includes an item of equipment with an original cost of $95,000 which was purchased on January 1, 2017. The equipment has an economic life of 20 years. For Cougar, the useful life of the asset is 15 years and the residual value is expected to be $5,000.
Cougar determines that the asset’s value in use is $58,000. Based on market assessments, the fair value of the asset is $66,000 and if it were to be sold, Cougar would incur a commission cost of 5% as well as legal fees of $1,000. The future undiscounted cash flows that are expected to be generated from continuing to use this equipment total $70,000.
Instructions
Assuming Cougar uses IFRS, answer the following questions as of December 31, 2020:
a) Calculate the recoverable amount.
b) Calculate the impairment loss.
c) Prepare the entry to record the impairment loss.
Assuming Cougar uses ASPE, answer the following question as of December 31, 2020:
d) Prepare the entry to record the impairment loss using ASPE. Show your work. If no entry is required, explain why.
Solutions
Expert Solution
| Answer | ||||||||||
| a)Recoverable amount shall be higher of the following: | ||||||||||
| *Fair Value less cost of disposal is 61,700 | ||||||||||
| *Value in use is 58000 | ||||||||||
| So Recoverable Amount is $ 58,000. | ||||||||||
| Fair Value = Market Value less cost of sale | ||||||||||
| 66000 - (5% of 66000)- 1000 | ||||||||||
| 61700 | $ | |||||||||
| Value in use = $ 58000 | ||||||||||
| (Assumed after Discounted factor $ 70000 comes to $58000) | ||||||||||
| b) Impared Loss = Carrying Amount - Recoverable Value | ||||||||||
| Impared Loss = 71000-58000 | ||||||||||
| Impared Loss = | 13000 | |||||||||
| Carrying Amount = (95000 - (4*((95000-5000)/15)) | ||||||||||
| 71000 | $ | |||||||||
| c) | ||||||||||
| $ | $ | |||||||||
| Impaired Loss A/c….......................Dr. | 13000 | |||||||||
| To Equipment A/c | 13000 | |||||||||
| (Being Impared loss provided) | ||||||||||
| d) ASPE requires goodwill to be tested for impairment whenever events or changes in circumstances indicate | ||||||||||
| As per ASPE Imparaired Loss = Carrying Amount - Fair Value | ||||||||||
| 71000 - 61700 | ||||||||||
| 9300 | $ |
ekkarill92 answered 2 years agoRelated Solutions
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2020
2019
Increase(Decrease)
Cash
$ 815,000
$ 700,000
Accounts receivable
1,128,000
1,168,000
Inventory
1,850,000
1,715,000
Property, plant, and equipment
3,307,000
2,967,000
Accumulated depreciation
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Investment in Myers Co.
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Loan receivable
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—
Total assets
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Accounts payable
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30,000
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below.
December
31
2020
2019
Assets
Cash
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Accounts
receivable (net) 1,000,000
1,020,000
Inventory
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Long-term
investments(carried at cost)
400,000 600,000
Plant assets
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Accumulated
depreciation (800,000) (900,000)
Patent
180,000 200,000
Total
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Liabilities
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accounts at December 31, 2020 and 2019, with a column showing the
increase (decrease) from 2019 to 2020.
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2020
2019
Increase
(Decrease)
Cash
$822,600
$700,100
$122,500
Accounts receivable
1,139,300
1,157,900
(18,600
)
Inventory
1,835,600
1,726,700
108,900
Property, plant, and equipment
3,276,300
2,980,900
295,400
Accumulated depreciation
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Investment in Myers Co.
312,200
272,500
39,700
Loan receivable
251,900
—
251,900
Total assets
$6,472,300
$5,790,700
$681,600
Accounts...
The following are Waterway Corp.’s comparative balance sheet accounts at December 31, 2020 and 2019, with...
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accounts at December 31, 2020 and 2019, with a column showing the
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2020
2019
Increase
(Decrease)
Cash
$807,900
$696,100
$111,800
Accounts receivable
1,130,100
1,166,300
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Inventory
1,850,400
1,707,300
143,100
Property, plant, and equipment
3,324,100
2,995,100
329,000
Accumulated depreciation
(1,163,100
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(1,032,700
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(130,400
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Investment in Myers Co.
308,700
277,600
31,100
Loan receivable
250,800
—
250,800
Total assets
$6,508,900
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Cash
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Accounts payable
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Accounts receivable
127,400
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Allowance for doubtful accounts
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Retained earnings
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Supplies
12,320
Land
112,000
Buildings
397,600
Accumulated depreciation—buildings
(61,600
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$652,400
$652,400
During 2022, the following transactions occurred.
1.
On January 1, Ayayai issued 3,360 shares of $40 par, 7%
preferred stock for $137,760.
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On January 1, Ayayai also...
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Marigold Corp.’s balance sheet at December 31, 2021, is
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MARIGOLD CORP.
Balance Sheet
December 31, 2021
Cash
$31,980
Accounts payable
$33,280
Accounts receivable
59,150
Common stock ($10 par)
104,000
Allowance for doubtful accounts
(1,950
)
Retained earnings
165,620
Supplies
5,720
Land
52,000
Buildings
184,600
Accumulated depreciation—buildings
(28,600
)
$302,900
$302,900
During 2022, the following transactions occurred.
1.
On January 1, Marigold issued 1,560 shares of $40 par, 7%
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Cash $51,660 Accounts payable $53,760 Accounts receivable 95,550
Common stock ($10 par) 168,000 Allowance for doubtful accounts
(3,150 ) Retained earnings 267,540 Supplies 9,240 Land 84,000
Buildings 298,200 Accumulated depreciation—buildings (46,200 )
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Cash $49,200 Accounts payable $51,200 Accounts receivable 91,000
Common stock ($10 par) 160,000 Allowance for doubtful accounts
(3,000 ) Retained earnings 254,800 Supplies 8,800 Land 80,000
Buildings 284,000 Accumulated depreciation—buildings (44,000 )
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Sheffield Corp.’s balance sheet at December 31, 2021, is presented below. SHEFFIELD CORP. Balance Sheet December...
Sheffield Corp.’s balance sheet at December 31, 2021, is
presented below. SHEFFIELD CORP. Balance Sheet December 31, 2021
Cash $51,660 Accounts payable $53,760 Accounts receivable 95,550
Common stock ($10 par) 168,000 Allowance for doubtful accounts
(3,150 ) Retained earnings 267,540 Supplies 9,240 Land 84,000
Buildings 298,200 Accumulated depreciation—buildings (46,200 )
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Problem 23-01
The following are Flounder Corp.’s comparative balance sheet
accounts at December 31, 2020 and 2019, with a column showing the
increase (decrease) from 2019 to 2020.
COMPARATIVE BALANCE SHEETS
2020
2019
Increase
(Decrease)
Cash
$812,400
$700,100
$112,300
Accounts receivable
1,135,500
1,158,500
(23,000
)
Inventory
1,844,800
1,713,900
130,900
Property, plant, and equipment
3,316,600
2,964,200
352,400
Accumulated depreciation
(1,160,900
)
(1,040,300
)
(120,600
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274,000
35,500
Loan receivable
250,500
—
250,500
Total assets
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$5,770,400...
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