Parnell Company acquired construction equipment on January 1, 2017, at a cost of $75,200. The equipment was expected to have a useful life of five years and a residual value of $11,000 and is being depreciated on a straight-line basis. On January 1, 2018, the equipment was appraised and determined to have a fair value of $70,600, a salvage value of $11,000, and a remaining useful life of four years. In measuring property, plant, and equipment subsequent to acquisition under IFRS, Parnell would opt to use the revaluation model in IAS 16.
Assume that a U.S.–based company is issuing securities to foreign investors who require financial statements prepared in accordance with IFRS. Thus, adjustments to convert from U.S. GAAP to IFRS must be made. Ignore income taxes.
Required:
Prepare journal entries for this equipment for the years ending December 31, 2017, and December 31, 2018, under (1) U.S. GAAP and (2) IFRS.
Prepare the entry(ies) that Parnell would make on the December 31, 2018 conversion worksheet to convert U.S. GAAP balances to IFRS.
In: Accounting
Parnell Company acquired construction equipment on January 1, 2017, at a cost of $76,000. The equipment was expected to have a useful life of six years and a residual value of $10,000 and is being depreciated on a straight-line basis. On January 1, 2018, the equipment was appraised and determined to have a fair value of $70,200, a salvage value of $10,000, and a remaining useful life of five years. In measuring property, plant, and equipment subsequent to acquisition under IFRS, Parnell would opt to use the revaluation model in IAS 16.
Assume that a U.S.–based company is issuing securities to foreign investors who require financial statements prepared in accordance with IFRS. Thus, adjustments to convert from U.S. GAAP to IFRS must be made. Ignore income taxes.
Required:
Prepare journal entries for this equipment for the years ending December 31, 2017, and December 31, 2018, under (1) U.S. GAAP and (2) IFRS.
1. Record the entry for depreciation expense as per U.S. GAAP.
2. Record the entry for depreciation expense as per IFRS.
3. Record the entry of the revaluation of equipment as per U.S. GAAP.
4. Record the entry of the revaluation of equipment as per IFRS.
5. Record the entry for depreciation expense as per U.S. GAAP.
6. Record the entry for depreciation expense as per IFRS.
Prepare the entry(ies) that Parnell would make on the December 31, 2018 conversion worksheet to convert U.S. GAAP balances to IFRS.
1. Record the entry for recording profit on revaluation of equipment due to conversion from U.S. GAAP to IFRS.
2. Record the entry for additional depreciation expense on revaluation of equipment due to conversion from U.S. GAAP to IFRS.
In: Accounting
Pratt Company acquired all of the outstanding shares of Spider, Inc., on December 31, 2021, for $490,350 cash. Pratt will operate Spider as a wholly owned subsidiary with a separate legal and accounting identity. Although many of Spider’s book values approximate fair values, several of its accounts have fair values that differ from book values. In addition, Spider has internally developed assets that remain unrecorded on its books. In deriving the acquisition price, Pratt assessed Spider’s fair and book value differences as follows:
| Book Values | Fair Values | |||||
| Computer software | $ | 45,500 | $ | 86,700 | ||
| Equipment | 74,500 | 60,000 | ||||
| Client contracts | 0 | 121,000 | ||||
| In-process research and development | 0 | 30,750 | ||||
| Notes payable | (95,400 | ) | (104,000 | ) | ||
At December 31, 2021, the following financial information is available for consolidation (credit balances in parentheses):
| Pratt | Spider | ||||||
| Cash | $ | 14,050 | $ | 14,400 | |||
| Receivables | 108,500 | 64,500 | |||||
| Inventory | 176,000 | 73,800 | |||||
| Investment in Spider | 490,350 | 0 | |||||
| Computer software | 244,000 | 45,500 | |||||
| Buildings (net) | 617,500 | 153,000 | |||||
| Equipment (net) | 379,000 | 74,500 | |||||
| Client contracts | 0 | 0 | |||||
| Goodwill | 0 | 0 | |||||
| Total assets | $ | 2,029,400 | $ | 425,700 | |||
| Accounts payable | $ | (95,900 | ) | $ | (54,800 | ) | |
| Notes payable | (530,500 | ) | (95,400 | ) | |||
| Common stock | (380,000 | ) | (100,000 | ) | |||
| Additional paid-in capital | (170,000 | ) | (25,000 | ) | |||
| Retained earnings | (853,000 | ) | (150,500 | ) | |||
| Total liabilities and equities | $ | (2,029,400 | ) | $ | (425,700 | ) | |
Prepare a consolidated balance sheet for Pratt and Spider as of December 31, 2021.
In: Accounting
1) Grasshopper Room Company acquired land and buildings
for $1,500,000. The land is appraised at $475,000 and the buildings
are appraised at $775,000. The debit to the Buildings account will
be:
A. $930,000
B. $775,000
C. $570,000
D. $1,025,000
2) Blockware Corporation has selected to
use the revaluation model for its assets. Recently it had its
building appraised. The appraiser placed a $5.0 M value on the
building. Back in 2012 this
building was purchased for $4.0M. This increases in value over cost
requires a:
A.Dr. to accumulated depreciation
B.Dr. to revaluation surplus
C.Cr. to revaluation surplus
D.Cr. to the building account
3)Big Rock Times Corporation (BRT) acquired equipment on
January 1, 2014, for $300,000. The equipment had an estimated
useful life of 10 years and an estimated salvage value of $25,000.
On January 1, 2017, BRT Corporation revised the total useful life
of the equipment to 6 years and the estimated salvage value to be
$10,000. Compute the book value of the equipment as of December 31,
2017, if BRT Corporation uses straightminus−line
depreciation.
A.$148,333
B.$151,667
C.$190,000
D.$155,000
4)A loss is recorded on the sale of property, plant, and
equipment when:
A. the asset's book value is greater than the amount of cash
received from the sale
B. the asset is sold for a price greater than the asset's book
value
C. a loss on the sale of property, plant, and equipment is not
allowed according to GAAP
D. the asset's book value is less than the balance in Accumulated
Depreciation
In: Accounting
Parnell Company acquired construction equipment on January 1, 2017, at a cost of $72,700. The equipment was expected to have a useful life of five years and a residual value of $12,000 and is being depreciated on a straight-line basis. On January 1, 2018, the equipment was appraised and determined to have a fair value of $67,800, a salvage value of $12,000, and a remaining useful life of four years. In measuring property, plant, and equipment subsequent to acquisition under IFRS, Parnell would opt to use the revaluation model in IAS 16.
Assume that a U.S.–based company is issuing securities to foreign investors who require financial statements prepared in accordance with IFRS. Thus, adjustments to convert from U.S. GAAP to IFRS must be made. Ignore income taxes.
Required:
1. Prepare journal entries for this equipment for the years ending December 31, 2017, and December 31, 2018, under (1) U.S. GAAP and (2) IFRS.
- Record the entry for depreciation expense as per U.S. GAAP.
- Record the entry for depreciation expense as per IFRS.
- Record the entry for the revaluation of equipment as per U.S. GAAP.
- Record the entry for the revaluation of equipment as per IFRS.
- Record the entry for depreciation expense as per U.S. GAAP.
- Record the entry for depreciation expense as per IFRS.
2. Prepare the entry(ies) that Parnell would make on the December 31, 2018 conversion worksheet to convert U.S. GAAP balances to IFRS.
- Record the entry for recording profit on revaluation of equipment due to conversion from U.S. GAAP to IFRS.
- Record the entry for additional depreciation expense on revaluation of equipment due to conversion from U.S. GAAP to IFRS.
In: Accounting
Vanguard Company acquired a depreciable asset on 1 July 2017 for $500,000, paid in cash. The asset was estimated to have a useful life of ten years and was depreciated on a straight-line basis. Vanguard chose the cost model for accounting for assets in this class. Disposal value at the end of the useful life is zero. Indicators of impairment have been identified for the reporting periods ended 30 June 2018, while indicators for a reversal of impairment have been identified for the reporting period ended 30 June 2019. There was no change in the estimated useful life or the disposal value of the equipment.
The recoverable amounts of the depreciable asset on these days were as follows:
Date Recoverable amount
30 June 2018 $360,000
30 June 2019 $340,000
REQUIRED:
Prepare journal entries, including narrations, relating to this depreciable asset from 30 June 2018 to 30 June 2019, assuming that the company complies with AASB 116 – ‘Property Plant and Equipment’ and AASB 136 – ‘Impairment of Assets’. Show all
In: Accounting
Plug Products owns 80 percent of the stock of Spark Filter Company, which it acquired at underlying book value on August 30, 20X6. At that date, the fair value of the noncontrolling interest was equal to 20 percent of the book value of Spark Filter. Summarized trial balance data for the two companies as of December 31, 20X8, are as follows: Plug Products Spark Filter Company Debit Credit Debit Credit Cash and Accounts Receivable $ 164,000 $ 91,000 Inventory 227,000 119,000 Buildings & Equipment (net) 270,000 182,000 Investment in Spark Filter Company 281,790 Cost of Goods Sold 168,000 133,000 Depreciation Expense 35,000 25,000 Current Liabilities $ 159,861 $ 27,661 Common Stock 181,000 89,000 Retained Earnings 464,000 205,000 Sales 278,339 228,339 Income from Spark Filter Company 62,590 Total $ 1,145,790 $ 1,145,790 $ 550,000 $ 550,000 On January 1, 20X8, Plug's inventory contained filters purchased for $79,000 from Spark Filter, which had produced the filters for $59,000. In 20X8, Spark Filter spent $119,000 to produce additional filters, which it sold to Plug for $159,339. By December 31, 20X8, Plug had sold all filters that had been on hand January 1, 20X8, but continued to hold in inventory $47,802 of the 20X8 purchase from Spark Filter. Required:
a. Prepare all consolidation entries needed to complete a consolidation worksheet for 20X8. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
b. Compute consolidated net income and income assigned to the controlling interest in the 20X8 consolidated income statement.
c. Compute the balance assigned to the noncontrolling interest in the consolidated balance sheet as of December 31, 20X8.
In: Accounting
On January 2, 2014, Able Company acquired new equipment at a cost of $290,000. The machine has an estimated useful life of 5 years, or 25,000 operating hours, after which it will have an estimated residual value of $15,000. Compute the depreciation charges for the first two years (2014 and 2015), using the following methods. (Show all computations).
a. Straight-line
b. Units-of-production (Equipment was used 8,000 hours during 2014 and 7,000 hours during 2015.)
c. Double-declining balance
In: Accounting
Agee Corporation acquired a 35% interest in Trent Company on January 1, 2018, for $500,000. At that time, Trent had 1,000,000 shares of its $1 par common stock issued and outstanding. During 2018, Trent paid cash dividends of $168,000 and thereafter declared and issued a 5% common stock dividend when the fair value was $2 per share. Trent's net income for 2018 was $360,000. What is the balance in Agee's equity investment account at the end of 2018? Balance in equity investment account
In: Accounting
Plug Products owns 80 percent of the stock of Spark Filter
Company, which it acquired at underlying book value on August 30,
20X6. At that date, the fair value of the noncontrolling interest
was equal to 20 percent of the book value of Spark Filter.
Summarized trial balance data for the two companies as of December
31, 20X8, are as follows:
| Plug Products | Spark Filter Company | ||||||||||||||||
| Debit | Credit | Debit | Credit | ||||||||||||||
| Cash and Accounts Receivable | $ | 151,000 | $ | 94,000 | |||||||||||||
| Inventory | 231,000 | 111,000 | |||||||||||||||
| Buildings & Equipment (net) | 275,000 | 191,000 | |||||||||||||||
| Investment in Spark Filter Company | 256,400 | ||||||||||||||||
| Cost of Goods Sold | 173,000 | 138,000 | |||||||||||||||
| Depreciation Expense | 40,000 | 30,000 | |||||||||||||||
| Current Liabilities | $ | 167,800 | $ | 62,000 | |||||||||||||
| Common Stock | 199,000 | 78,000 | |||||||||||||||
| Retained Earnings | 459,000 | 213,000 | |||||||||||||||
| Sales | 261,000 | 211,000 | |||||||||||||||
| Income from Spark Filter Company | 39,600 | ||||||||||||||||
| Total | $ | 1,126,400 | $ | 1,126,400 | $ | 564,000 | $ | 564,000 | |||||||||
On January 1, 20X8, Plug's inventory contained filters purchased
for $68,000 from Spark Filter, which had produced the filters for
$48,000. In 20X8, Spark Filter spent $108,000 to produce additional
filters, which it sold to Plug for $153,000. By December 31, 20X8,
Plug had sold all filters that had been on hand January 1, 20X8,
but continued to hold in inventory $45,900 of the 20X8 purchase
from Spark Filter.
Required:
a. Prepare all consolidation entries needed to complete a
consolidation worksheet for 20X8. (If no entry is required
for a transaction/event, select "No journal entry required" in the
first account field.)
b. Compute consolidated net income and income assigned to the
controlling interest in the 20X8 consolidated income
statement.
c. Compute the balance assigned to the noncontrolling interest
in the consolidated balance sheet as of December 31,
20X8.
In: Accounting