Reference no: EM132618945

Questions -

Q1. On September 12, Martinez Company agreed to an exchange of assets with another company. Martinez gave up a machine with an original cost of $50,000. $31,000 in accumulated depreciation had been recorded on this machine over the course of Martinez's ownership. Martinez determined that the machine being given up had a fair value of $18,200. Martinez also paid $8,000 in cash. Assume that Martinez follows IFRS and that the transaction has commercial substance. Prepare the journal entry to record the asset exchange on Martinez's books.

Q2. Riverbed Corp., a small company that follows ASPE, owns machinery that cost $955,000 and has accumulated depreciation of $405,000. The undiscounted future net cash flows from the use of the asset are expected to be $527,000. The equipment's fair value is $445,000. Using the cost recovery impairment model, prepare the journal entry, if any, to record the impairment loss.

Q3. Marigold Corp., a small company that follows ASPE, owns machinery that cost $900,000 and has accumulated depreciation of $410,000. The undiscounted future net cash flows from the use of the asset are expected to be $452,000. The equipment's fair value is $430,000. By the end of the following year, the machinery's fair value has increased to $460,000.

Assuming the machinery continues to be used in production, prepare the journal entry required, if any, to record the increase in its fair value.

Q4. Metlock Ltd. is a publicly listed company following IFRS. Assume that on December 31, 2020, the carrying amount of land on the statement of financial position (SFP) is $525,000. Management determines that the land's value in use is $430,000 and that the fair value less costs to sell is $365,000.

a) Using the rational entity impairment model, prepare the journal entry required, if any, to record the impairment loss.

b) Due to an economic rebound in the area, by the end of the following year the land has a value in use of $590,000 and fair value less costs of disposal of $455,000. Prepare the journal entry required, if any, to record the increase in its recoverable amount.

Q5. Pronghorn Corporation purchased a patent from MaFee Corp. on January 1, 2020, for $83,470. The patent had a remaining legal life of 17 years. Prepare Pronghorn's journal entries to record the 2020 patent purchase and amortization for the year.