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 1 year agoRelated Solutions
Below are Sullivan Corp.'s comparative balance sheet accounts at December 31, 2020 and 2019,
Below are Sullivan Corp.'s comparative balance sheet accounts at December 31, 2020 and 2019,
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
(1,165,000)
(1,040,000)
Investment in Myers Co.
310,000
275,000
Loan receivable
250,000
—
Total assets
$6,495,000
$5,785,000
Accounts payable
$1,015,000
$ 955,000
Income taxes payable
30,000
50,000
Dividends payable
80,000
100,000
Lease...
3020 Corp.'s balance sheet accounts as of December 31, 2020 and 2019 and information relating to...
3020 Corp.'s balance sheet accounts as of December 31, 2020 and
2019 and information relating to 2020 activities are presented
below.
December
31
2020
2019
Assets
Cash
$1,040,000 $ 200,000
Accounts
receivable (net) 1,000,000
1,020,000
Inventory
1,300,000 1,200,000
Long-term
investments(carried at cost)
400,000 600,000
Plant assets
3,400,000 2,000,000
Accumulated
depreciation (800,000) (900,000)
Patent
180,000 200,000
Total
assets $6,520,000 $
4,320,000
Liabilities
and Stockholders' Equity
Accounts
payable and accrued liabilities $1,660,000 ...
The following are Flounder Corp.’s comparative balance sheet accounts at December 31, 2020 and 2019, with...
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
$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
(1,165,600
)
(1,047,400
)
(118,200
)
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...
The following are Waterway 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
$807,900
$696,100
$111,800
Accounts receivable
1,130,100
1,166,300
(36,200
)
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
)
(1,032,700
)
(130,400
)
Investment in Myers Co.
308,700
277,600
31,100
Loan receivable
250,800
—
250,800
Total assets
$6,508,900
$5,809,700
$699,200
Accounts...
Ayayai Corp.’s balance sheet at December 31, 2021, is presented below. AYAYAI CORP. Balance Sheet December...
Ayayai Corp.’s balance sheet at December 31, 2021, is presented
below.
AYAYAI CORP.
Balance Sheet
December 31, 2021
Cash
$68,880
Accounts payable
$71,680
Accounts receivable
127,400
Common stock ($10 par)
224,000
Allowance for doubtful accounts
(4,200
)
Retained earnings
356,720
Supplies
12,320
Land
112,000
Buildings
397,600
Accumulated depreciation—buildings
(61,600
)
$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.
2.
On January 1, Ayayai also...
Marigold Corp.’s balance sheet at December 31, 2021, is presented below. MARIGOLD CORP. Balance Sheet December...
Marigold Corp.’s balance sheet at December 31, 2021, is
presented below.
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%
preferred stock for $63,960.
2.
On January 1, Marigold also...
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 )
$489,300 $489,300 During 2022, the following transactions occurred.
1. On January 1, Sheffield issued 2,520 shares of $40 par, 7%
preferred stock for $103,320. 2. On January 1, Sheffield also...
Sarasota Corp.’s balance sheet at December 31, 2021, is presented below. SARASOTA CORP. Balance Sheet December...
Sarasota Corp.’s balance sheet at December 31, 2021, is
presented below. SARASOTA CORP. Balance Sheet December 31, 2021
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 )
$466,000 $466,000 During 2022, the following transactions occurred.
1. On January 1, Sarasota issued 2,400 shares of $40 par, 7%
preferred stock for $98,400. 2. On January 1, Sarasota also...
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 )
$489,300 $489,300 During 2022, the following transactions occurred.
1. On January 1, Sheffield issued 2,520 shares of $40 par, 7%
preferred stock for $103,320. 2. On January 1, Sheffield also...
Problem 23-01 The following are Flounder Corp.’s comparative balance sheet accounts at December 31, 2020 and...
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
)
Investment in Myers Co.
309,500
274,000
35,500
Loan receivable
250,500
—
250,500
Total assets
$6,508,400
$5,770,400...
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
- Using the following reduction potentials: I2(s) + 2e- <---> 2I-(aq) E0 = 0.535 V I2 (aq)...
- Why are learnability and critical thinking crucial skills for the 21stcentury? And, how can you improve...
- Hudson Corporation is considering three options for managing its data warehouse: continuing with its own staff,...
- LUVE produces bracelets. Each band generates $460 in revenue and requires one ounce of gold as...
- (The following data apply to the next three questions.) Assume the following cost and revenue data...
- C# programming Create a classes called AlphabetDice that simulates a multi-sided dices with alphabet characters on...
- What are the trends in Distributed Systems?
ADVERTISEMENT