Question

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The following information pertains to Company A's December 31, Year 4, selected items of property, plant, and equipment:

Asset	Fair value	Cost to sell the asset	Present value of sum of all cash flows expected from the asset	Sum of all undiscounted cash flows expected from the asset
1. Machine	$122,000	$3,000	$118,000	$130,000
2. Ship	$210,000	$4,000	$212,000	$230,000
3. Parcel of land	$560,000	$8,000	$480,000	$540,000

Several independent situations relating to Company A's assets occurred. These situations affected the basis of accounting (U.S. GAAP or IFRS) results. Recognition of the higher amount of Year 4 impairment losses, or the same amount of impairment losses, can be determined.

Select from the option list provided the basis of accounting (U.S. GAAP or IFRS) that results in recognition of the higher amount of Year 4 impairment losses for the following independent situations relating to Company A's assets. Each choice may be used once, more than once, or not at all.

Scroll down to complete all parts of this task.

The following information pertains to Company A's December 31, Year 4, selected items of property, plant, and equipment:

Asset	Fair value	Cost to sell the asset	Present value of sum of all cash flows expected from the asset	Sum of all undiscounted cash flows expected from the asset
1. Machine	$122,000	$3,000	$118,000	$130,000
2. Ship	$210,000	$4,000	$212,000	$230,000
3. Parcel of land	$560,000	$8,000	$480,000	$540,000

Several independent situations relating to Company A's assets occurred. These situations affected the basis of accounting (U.S. GAAP or IFRS) results. Recognition of the higher amount of Year 4 impairment losses, or the same amount of impairment losses, can be determined.

Select from the option list provided the basis of accounting (U.S. GAAP or IFRS) that results in recognition of the higher amount of Year 4 impairment losses for the following independent situations relating to Company A's assets. Each choice may be used once, more than once, or not at all.

Situation	Accounting basis
1. The machine was purchased on July 1, Year 1, for $300,000. The useful life of the machine is 6 years with no residual value. The company depreciates the machine using the straight-line depreciation method.
2. The ship was purchased on January 1, Year 4, for $400,000. The useful life of the ship is 4 years with no residual value. The company depreciates the ship using the sum-of-the-years'-digits (SYD) depreciation method.
3. The parcel of land was purchased on January 1, Year 2, for $550,000.

options are US GAAP, IFRS, or the same amount

Answer 1

Answers

Accounting basis

1. The accounting basis for machinery for $300,000 will be the IFRS that is $280,060

2. The accounting basis for ship for $400,000 will be US GAAP that is $350,980

3. The accounting basis for parcel of land for $550,000 will be the same amount as $550,008