ABC Ltd acquired a machine for $750 000 on 1 July 2018. The machine had a useful life of five years and was depreciated on a straight-line basis with no disposal value. ABC Ltd adopts the cost model for accounting for assets in this class. ABC Ltd makes the following estimates of the value of the machine: Date Net selling price Value in use Fair Value 30 June 2019 $550 000 520 000 590 000 30 June 2020 $460 000 420 000 490 000 Indicators of impairment were identified on 30 June 2019, while indicators of a reversal of impairment were found on 30 June 2020.
REQUIRED: Prepare journal entries relating to this asset from 30 June 2019 to 30 June 2020. Show the steps of impairment (or reversal of impairment) tests. Show all working (step by step).
In: Accounting
ABC Ltd acquired a machine for $750 000 on 1 July 2018. The machine had a useful life of five years and was depreciated on a straight-line basis with no disposal value. ABC Ltd adopts the cost model for accounting for assets in this class. ABC Ltd makes the following estimates of the value of the machine:
| Date | Net selling price | Value in use | Fair Value |
| 30 June 2019 | $550 000 | 520 000 | 590 000 |
| 30 June 2020 | $460 000 | 420 000 | 490 000 |
Indicators of impairment were identified on 30 June 2019, while indicators of a reversal of impairment were found on 30 June 2020.
REQUIRED: Prepare journal entries relating to this asset from 30 June 2019 to 30 June 2020. Show the steps of impairment (or reversal of impairment) tests. Show all working (step by step).
In: Accounting
ABC Ltd acquired a machine for $750 000 on 1 July 2018. The machine had a useful life of five years and was depreciated on a straight-line basis with no disposal value. ABC Ltd adopts the cost model for accounting for assets in this class. ABC Ltd makes the following estimates of the value of the machine: Date Net selling price Value in use Fair Value 30 June 2019 $550 000 520 000 590 000 30 June 2020 $460 000 420 000 490 000 Indicators of impairment were identified on 30 June 2019, while indicators of a reversal of impairment were found on 30 June 2020.
REQUIRED: Prepare journal entries relating to this asset from 30 June 2019 to 30 June 2020. Show the steps of impairment (or reversal of impairment) tests. Show all working (step by step).
In: Accounting
On 1 July 2020 Mango Ltd acquired all the issued shares (cum div.) of Cream Ltd for $450,000. At date of acquisition the equity of Cream was recorded at:
The fair value of land was $220,000 (carrying amount $200,000).
The fair value of equipment was $230,000 (cost $240,000 and carrying amount $210,000).
On this date the records of Cream Ltd showed goodwill at cost of $10,000 and dividends payable of $15,000. All other assets and liabilities were carried at amounts equal to fair values.
The land was sold on 1 January 2021 and equipment has a useful life of 5 years.
The dividend was paid on 31 August 2020.
Assume a tax rate of 30%
Required:
In: Accounting
pennyroyal ltd acquired an item of plant under a lease on1 april 2019. an initial payment of N$2 000 000 is paid on 1 april 2019 and the present value of the future lease payments is N$7 092 000. pennyroyal ltd will make four further annual payments of N$2 000 000 paid in advance commencing 1 april 2020, the useful life of the plant is deemed tot be 8 years. pennyroyal ltd will obtain legal title of the plant following the final payment. the interest rate implicit lease is 5%. what is the total charge to appear in the statement of profit or loss for the year ended 31 march 2020?
In: Accounting
Whaley Distributors is a wholesale distributor of electronic components. Financial statements for the years ended December 31, 2019, and 2020. reported the following amount and subtotals ($ in millions)
2019 2020
Assets $800 880
Liabilities 360 430
Shareholders' Equity 440 450
Net Income 156 181
In 2021, the following situation occurred or came to light
A. Internal auditors discovered that ending inventories reported on the financial statements the two previous years were mistated due to faulty internal controls. The errors were in the following amounts.
2019 inventory overstated by $12.6 million
2020 inventory understated by $ 10.6 million
B. A liability was accrued in 2019 for a probable payment of $8.2 million in connection with a lawsuit ultimately settled in December 2021 for $ 4.6 million.
c. A patent costing $216 million at the beginning of 2019, expected to benefit operations for a total of six years has not been amortized since acquired.
D. Whaley's conveyor equipment was depreciated by the sum of -the -years- digits(SYD) basic since it was acquired at the beginning of 2019 at a cost of $ 390 million. it has an expected useful life of five years and no expected residual value. At the beginning of 2021. Whaley decided to switch to straight-line depreciation
Required
for each situation
1. Prepare any journal entry necessary as a direct result of the change or error correction, as well as any adjusting entry for 2021 related to the situation described. ( ignore tax effect)
2. Determine the amounts to be reported for each of the five items shown above from the 2019 and 2020 financial statements when those amounts are reported again in the 2019-2021 comparative financial statements.
Expenses
In: Accounting
On January 1, 2020 (the first day of its fiscal year) Vaughn
Ltd. acquired a patent which gave the company the right to use a
production process. The process met the six criteria for
capitalization as an intangible asset. Below is a listing of the
events relating to the patent over the five fiscal years from 2020
through 2024:
| 2020: | ||
| ● | on January 1, acquired the patent for the production process from its inventory for a cash payment of $12,800,000, and determined that the process had an indefinite useful life. | |
| ● | on December 31, tested the patent for impairment and determined that its fair value was $13,900,000. | |
| 2021: | ||
| ● | on December 31, tested the patent for impairment and determined that its fair value was $11,500,000. | |
| 2022: | ||
| ● | on December 31, tested the patent for impairment and determined that its fair value was $13,000,000. | |
| 2023: | ||
| ● | on January 1, determined that the useful life of the patent was no longer indefinite, its carrying amount was recoverable, its estimated remaining useful life was 5 years, its estimated residual value was $0 and the pattern of economic benefits to be obtained from the patent during those 5 years was evenly spread over those 5 years. | |
| ● | on December 31, tested the process for impairment and recoverability and determined that its fair value was $1,100,000 and its carrying amount was recoverable. | |
| 2024: | ||
| ● | on December 31, tested the patent for impairment and recoverability and determined that its fair value was $0 and its carrying amount was not recoverable. |
Prepare all journal entries related to the patent for the
production process Vaughn will record from January 1, 2020 to
December 31, 2024, using the cost recovery impairment model.
In: Accounting
On January 1, 2020 (the first day of its fiscal year) Wildhorse
Ltd. acquired a patent which gave the company the right to use a
production process. The process met the six criteria for
capitalization as an intangible asset. Below is a listing of the
events relating to the patent over the five fiscal years from 2020
through 2024:
| 2020: | ||
| ● | on January 1, acquired the patent for the production process from its inventory for a cash payment of $17,400,000, and determined that the process had an indefinite useful life. | |
| ● | on December 31, tested the patent for impairment and determined that its fair value was $18,400,000. | |
| 2021: | ||
| ● | on December 31, tested the patent for impairment and determined that its fair value was $15,400,000. | |
| 2022: | ||
| ● | on December 31, tested the patent for impairment and determined that its fair value was $16,300,000. | |
| 2023: | ||
| ● | on January 1, determined that the useful life of the patent was no longer indefinite, its carrying amount was recoverable, its estimated remaining useful life was 7 years, its estimated residual value was $0 and the pattern of economic benefits to be obtained from the patent during those 7 years was evenly spread over those 7 years. | |
| ● | on December 31, tested the process for impairment and recoverability and determined that its fair value was $1,000,000 and its carrying amount was recoverable. | |
| 2024: | ||
| ● | on December 31, tested the patent for impairment and recoverability and determined that its fair value was $0 and its carrying amount was not recoverable. |
record entry for
Jan 1, 2020
Dec 31,2020
Dece 31,2021
Dec 31, 2022
Dec 31, 2023
Dec 31, 2024 (to record amortization expense)
Dec 31, 2024 (to record loss on impairment)
In: Accounting
How can we explain the following scenario using the own-price elasticity of demand? You only need to specify whether demand is inelastic or elastic and how you know.
Recent efforts by the Food and Drug Administration to reduce the flow of illegal drugs into the United States have actually benefited drug dealers
In: Economics
Suppose that the one-year interest rate is 4.58 percent in the United States and 2.66 percent in Germany, and that the spot exchange rate is $1.1321/€ and the one-year forward exchange rate, is $1.2449/€. Assume that an arbitrageur can borrow up to $1,000,000. Calculate his arbitrage profit. If there is no arbitrage opportunities enter zero as your answer.
In: Finance