Question

On July 1, 2020, Concord Ltd., a publicly listed company, acquired assets from Riverbed Ltd. On the transaction date, a reliable, independent valuator assessed the fair values of these assets as follows: Manufacturing plant (building #1) Storage warehouse (building #2) Machinery (in building #1) Machinery (in building #2) $399,680 209,880 74,700 45,000 The buildings are owned by the company, and the land that the buildings are situated on is owned by the local municipality and is provided free of charge to the owner of the buildings to encourage local employment. In exchange for the acquisition of these assets, Concord issued 145,510 common shares. Concord's shares are thinly traded (that is, traded in relatively low volume leading to more volatile price changes than most public companies). In the most recent sale of Concord's shares on the Toronto Stock Exchange, 610 shares were sold for $5 per share. At the time of acquisition, both buildings were considered to have an expected remaining useful life of 10 years, the machinery in building #1 was expected to have a remaining useful life of 3 years, and the machinery in building #2 was expected to have a useful life of 9 years. Concord uses straight-line depreciation with no residual values. At December 31, 2020, Concord's fiscal year end, Concord recorded the correct depreciation amounts for the six months that the assets were in use. An independent appraisal concluded that the assets had the following fair values: Manufacturing plant (building #1) Storage warehouse (building #2) $387,600 178,600 At December 31, 2021, Concord once again retained an independent appraiser and determined that the fair value of the assets was: Manufacturing plant (building #1) Storage warehouse (building #2) $339,780 160,790

Answer 1

Date	Particulars	Debit	Credit		Calculations
01 July 2020	Manufacturing Plant (building #1) Dr	399680
	Storage Warehouse (building #2) Dr	209880
	Machinery (in building #1) Dr	74700
	Machinery (in building #2) Dr.	45000
	To Equity Share capital		727550		145510*5
	To Capital Reserve		1710
	(Being assets acquired from Riverbed Ltd. By issue of 145510 common shares)
31 December 2020	Depreciation Dr.	39968			399680/10
	To Manufacturing Plant (building #1)		39968
	(To record Depreciation)
31 December 2020	Depreciation Dr.	20988			209880/10
	To Storage Warehouse (building #2)		20988
	(To record Depreciation)
31 December 2020	Depreciation Dr.	24900			74700/3
	To Machinery (in building #1)		24900
	(To record Depreciation)
31 December 2020	Depreciation Dr.	5000			45000/9
	To Machinery (in building #2)		5000
	(To record Depreciation)
31 December 2020	Manufacturing Plant (building #1) Dr	27888			387600-(399680-39968)
	To Revaluation Reserve		27888
	(To Revalue Manufacturing Plant)
31 December 2020	Profit & Loss Dr	10292			(178600-(209880-20988))
	To Storage Warehouse (building #2)		10292
	(To Revalue Storage Warehouse)
31 December 2021	Depreciation Dr.	43066.67			387600/9
	To Manufacturing Plant (building #1)		43066.67
	(To record Depreciation)
31 December 2021	Depreciation Dr.	19844.44			178600/9
	To Storage Warehouse (building #2)		19844.44
	(To record Depreciation)
31 December 2021	Depreciation Dr.	24900			74700/3
	To Machinery (in building #1)		24900
	(To record Depreciation)
31 December 2021	Depreciation Dr.	5000			45000/9
	To Machinery (in building #2)		5000
	(To record Depreciation)
31 December 2021	Revaluation Reserve Dr	4753.333			(339780-(387600-43067))
	To Manufacturing Plant (building #1)		4753.333
	(To Revalue Manufacturing Plant)
31 December 2021	Storage Warehouse (building #2) Dr	2034.444			160790-(178600-19844)
	To Profit & Loss		2034.444
	(To Revalue Storage Warehouse)