Exercise 11-23 The information that follows relates to equipment owned by Bonita Limited at December

Exercise 11-23

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Exercise 11-23 The information that follows relates to equipment owned by Bonita Limited at December
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The information that follows relates to equipment owned by Bonita Limited at December 31, 2017:

Cost

 

$7,830,000

Accumulated depreciation to date

 

870,000

Expected future net cash flows (undiscounted)

 

6,090,000

Expected future net cash flows (discounted, value in use)

 

5,524,500

Fair value

 

5,394,000

Costs to sell (costs of disposal)

 

43,500

At December 31, 2017, Bonita discontinues use of the equipment and intends to dispose of it in the coming year by selling it to a competitor. It is expected that the costs of disposal will total $43,500.

Assume that Bonita is a private company that follows ASPE.

Prepare the journal entry at December 31, 2017, to record asset impairment, if any.

2.

 

Prepare the journal entry to record depreciation expense for 2018.

3.

 

Assume that the asset was not sold by December 31, 2018. The equipment’s fair value (and recoverable amount) on this date is $5.655 million. Prepare the journal entry, if any, to record the increase in fair value. It is expected that the costs of disposal will total $43,500.

Repeat the requirements in (a) above assuming that Bonita is a public company that follows IFRS, and that the asset meets all criteria for classification as an asset held for sale.