Parnell Company acquired construction equipment on January 1, 2017, at a cost of $79,200. The equipment was expected to have a useful life of five years and a residual value of $13,000 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 $75,700, a salvage value of $13,000, 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.
Record the entry for depreciation expense as per U.S. GAAP.
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.
Solution:
Journal Entries : | ||||
As per US Gaap: | ||||
31-12-2017 | Depreciation Expense A/C | Dr. | 13240 | |
To Accumulated Depreciation A/C | Cr. | 13240 | ||
(Depreciation for 2017) | ||||
01-01-2018 | No Entry | |||
(Revaluation of Asset) | ||||
31-12-2018 | Depreciation Expense A/C | Dr. | 13240 | |
To Accumulated Depreciation A/C | Cr. | 13240 | ||
(Depreciation for 2018) | ||||
As per IFRS: | ||||
31-12-2017 | Depreciation Expense A/C | Dr. | 13240 | |
To Accumulated Depreciation A/C | Cr. | 13240 | ||
(Depreciation for 2017) | ||||
01-01-2018 | Asset A/C | Dr. | 9740 | |
To Revaluation Surplus A/C | Cr. | 9740 | ||
(Revaluataion of asset) | ||||
31-12-2018 | Depreciation Expense A/C | Dr. | 15675 | |
To Accumulated Depreciation A/C | Cr. | 15675 | ||
(Depreciation for 2018) |
Parnell Company acquired construction equipment on January 1, 2017, at a cost of $79,200. The equipment...
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CH11Question5
Parnell Company acquired construction equipment on January 1,
2017, at a cost of $72,000. The equipment was expected to have a
useful life of four 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
$67,100, a salvage value of $11,000, and a remaining useful life of
three years. In measuring property, plant, and equipment subsequent
to acquisition...
Pamell Company acquired construction equipment on January 1, 2017, at a cost of $79,200. The equipment was expected to have a useful life of five years and a residual value of $13,000 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 $75,700, a salvage value of $13,000, and a remaining useful life of four years. In measuring property, plant, and equipment subsequent to acquisition under...
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b. prepare entry(ies) that parnell would make on the december
31, 2018 conversion worksheet to conver us gaap balances to
ifrs.
on
able to figure out. I keep getting for 2017 $47020 and 2018 $53275
which = $6255 but i know its wrong. please help
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