Reference no: EM132737559

Quinn Industries Limited (QIL) is a private company that follows ASPE. On January 8, 2017 QIL purchased a specialized machine for $4,800,000 cash. On the date of purchase, the machine had an estimated useful life of 8 years and no residual value. On April 27 2018, a major part costing $350,000 and designed to increase the machine's efficiency was added. When the addition was completed, the estimated useful life of the machine remained unchanged. QIL's policy is to use straight-line method of depreciation calculated to the nearest whole month.

• However, by December 31, 2018, new technology had been recently introduced that would eventually render the machine obsolete. At that time, Quinn's controller estimated that expected undiscounted future net cash flows and expected discounted future net cash flows associated with the machine would be $2,600,000 and $2,320,000, respectively. The machine had a fair value of $2,200,000 on that date and estimated disposal costs were $40,000. QIL intends on continuing to use the machine. However, management has now revised the remaining useful life of the machine down to a total of 4 years.
• On May 6, 2020, QIL sold the machine for $2,000,000.
• QIL has a December 31 year-end.

Required:

Problem (a) Prepare the journal entry, if any, to record asset impairment at December 31, 2018.

Problem (b) Prepare the journal entry to record the sale of the machine on May 6, 2020.

Problem (c) Assume Quinn Industries Limited follows IFRS instead of ASPE. Prepare the journal entry, if any, to record asset impairment at December 31, 2018.