Rhino Corporation is a manufacturer of automobile parts. Its capital assets include specialized equipment that is being used in the finishing stage of its manufacturing process. The equipment was purchased in 2020 and is being depreciated using the units of production method. By December 31, 2021, the book (carrying) value was $430,000 (after depreciation expense had been recorded). However, at that time, Rhino became aware of new technology that would make the equipment obsolete within the next five years. An appraisal puts the equipment's future undiscounted net cash flows at $390,000 and its fair value at $300,000. While considering its options for the eventual replacement, Rhino will continue using the equipment, but will change to straight-line depreciation. Instructions Assuming Rhino is a private Canadian corporation apply ASPE, a) Prepare the journal entry, if any, to record the impairment loss at December 31, 2021.(4 marks) b) Prepare the journal entries to record 2022 and 2023 depreciation. (4 marks)
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- Moderna Ltd. owned several manufacturing facilities to produce vaccines. On September 15 2020, Moderna decided to sell one of its manufacturing buildings. The building had cost $4,000,000 when originally purchased 8 years ago. The building had been depreciated using the straight-line method with no residual value. Moderna estimated that the building had a 25-year life when purchased. Assume 8 years of depreciation has already been recorded in the accounts to the date of disposal by Moderna and the building was sold for $2,200,000 cash. By how much is depreciation expense debited each year until disposition? What is the balance in the accumulated depreciation account of the building on September 15, 2020?…Moderna Ltd. owned several manufacturing facilities to produce vaccines. On September 15 2020, Moderna decided to sell one of its manufacturing buildings. The building had cost $4,000,000 when originally purchased 8 years ago. The building had been depreciated using the straight-line method with no residual value. Moderna estimated that the building had a 25-year life when purchased. Assume 8 years of depreciation has already been recorded in the accounts to the date of disposal by Moderna and the building was sold for $2,200,000 cash. By how much is depreciation expense debited each year until disposition? What is the balance in the accumulated depreciation account of the building on September 15, 2020?…The following transactions involving intangible assets of Blossom Corporation occurred on or near December 31, 2020. 1. Minton paid Grand Company $360,000 for the exclusive right to market a particular product, using the Grand name and logo in promotional material. The franchise runs for as long as Blossom is in business. 2. Blossom spent $540,000 developing a new manufacturing process. It has applied for a patent, and it believes that its application will be successful. 3. In January, 2021, Blossom's application for a patent (#2 above) was granted. Legal and registration costs incurred were $189,000. The patent runs for 20 years. The manufacturing process will be useful to Minton for 10 years. 4. Blossom incurred $144,000 in successfully defending one of its patents in an infringement suit. The patent expires during December, 2024. 5. Blossom incurred $432,000 in an unsuccessful patent defense. As a result of the adverse verdict, the patent, with a…
- Kingbird Assets Inc., a publicly listed company, has a building with an initial cost of $406,000. At December 31, 2020, the date of revaluation, accumulated depreciation amounted to $99,000. The fair value of the building, by comparing it with transactions involving similar assets, is assessed to be $337,700. On January 5, 2021, Kingbird sold the building for $332,700 cash. Your answer is partially correct. Prepare the journal entries to record the sale of the building after having used the cost model. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts.) Date Account Titles and Explanation Debit Credit Jan. 5 Accumulated Depreciation - Buildings 99000 Cash 332700 Gain on Disposal of Building BuildingsOn January 1, 2021, Larry Company purchased a patent for an immune system boosting drink called Infra for P800,000. The patent is determined to have an indefinite life. During 2022, a competitor introduced a new product that is in direct competition with Infra; hence, the patent was tested for possible impairment. Data gathered suggests that the patent still has an indefinite life, but the cash flows to be generated from the asset have been reduced to either P40,000 per year (with 50% probability) or to P80,000 per year (with 50% probability). The appropriate risk-free interest rate is 8% and the risk-adjusted interest rate is 10%. What is the impairment loss recognized in the accounts for the year ended December 31, 2022? P200,000 P400,000 P800,000 P0Oriole Company purchased land on February 1, 2020, at a cost of $2,102,000. It estimated that a total of 53,000 tons of mineral was available for mining. After it has removed all the natural resources, the company will be required to restore the property to its previous state because of strict environmental protection laws. It estimates the fair value of this restoration obligation at $191,000. It believes it will be able to sell the property afterwards for $274,000. It incurred developmental costs of $525,000 before it was able to do any mining. In 2020, resources removed totaled 10,600 tons. The company sold 5,300 tons. Compute the following information for 2020. (a) Per unit mineral cost $ /ton (b) Total material cost of December 31, 2020, inventory $ +A (c) Total material cost in cost of goods sold at December 31, 2020 $
- Pharoah Corp., reporting under ASPE, has provided the following information regarding its intangible assets: 1. A patent was purchased from Marvin Inc. for $1.1 million on January 1, 2019. Pharoah estimated the patent’s remaining useful life to be 10 years. The patent was carried in Marvin’s accounting records at a carrying amount of $1,400,000 when Marvin sold it to Pharoah. On January 1, 2020, because of recent events in the field, Pharoah estimates that the remaining life of this patent is only five years from January 1, 2020. 2. During 2020, a franchise was purchased from Burr Ltd. for $304,000. As part of the deal, Burr must also be paid 6% of revenue from the franchise operations. Revenue from the franchise for 2020 was $1.2 million. Pharoah estimates the franchise’s useful life to be 10 years and takes a full year’s amortization in the year of purchase. 3. Pharoah incurred the following research costs in 2020: Materials and equipment $81,200 Personnel…On January 1, 2021, SMC decided to dispose of an item of plant that is carried in its records at a cost of P1,000,000, with accumulated depreciation of P200,000. Depreciation on the plant since it was originally acquired has been charged at P10,000 per month. The plant will continue to be operated until it is sold, at which time the operations of the plant will be outsourced. The company undertook all the necessary action to be able to classify the asset as held for sale. It is estimated that it could sell the plant for its fair value of P720,000, incurring P20,000 selling costs in the process. The plant has been depreciated at an amount of P10,000 per month. On March 31, 2021, the plant had not been sold but, due to shortage of this type of plant, there had been an increase in the fair value to P770,000. On June 30, 2021, SMC sold the plant for P785,000, incurring P25,000 selling costs. As a result of your audit, Required: a. Calculate the impairment loss on January 1, 2021 b.…George Young Industries (GYI) acquired industrial robots at the beginning of 2018 and added them to the company’s assembly process. During 2021, management became aware that the $2.8 million cost of the equipment was inadvertently recorded as repair expense on GYI’s books and on its income tax return. The industrial robots have 10-year useful lives and no material salvage value. This class of equipment is depreciated by the straight-line method for financial reporting purposes and for tax purposes it is considered to be MACRS 7-year property. Cost deducted over 7 years by the modified accelerated recovery system as follows: Year MACRSDeductions 2018 $ 400,120 2019 685,720 2020 489,720 2021 349,720 2022 250,040 2023 249,760 2024 250,040 2025 124,880 Totals $ 2,800,000 The tax rate is 25% for all years involved.Required:1. & 3. Prepare any journal entry necessary as a direct result of the error described and the adjusting…
- On January 1,2020 Petron Company purchased an oil tanker depot at the cost of P 7,000,000 the entity is expected to operate the depot for five years, after which it is legally required to dismantle the depot and remove the underground storage tanks. The oil tanker depot is depreciated using the straight line method with no residual value. It is reliably estimated that the cost of decommissioning the depot will amount to P 1,500,000. The appropriate Discount rate is 10%. The present value of 1 at 10% for five period is 0.62. At the beginning of 2022, the entity reliably estimated that the carrying amount of decommissioning liability is P 120,000 under what it should be. The discount rate remains at 10%. On December 31,2024 after 5 years of operating the entity paid a demolition entity to dismantle the depot at a price of P 1,700,000 Required: Prepare all the required Journal Entries from January 1,2020 up to December 31,2024 AtBlossom Company purchased a warehouse on January 1, 2019, for $480,000. At the time of purchase, Blossom anticipated that the warehouse would be used to facilitate the expansion of its product lines. The warehouse is being depreciated over 20 years and is expected to have a residual value of $60,000. At the beginning of 2024, the company decided that the warehouse would no longer be used and should be sold for its carrying amount. At the end of 2024, the warehouse still had not been sold, and its net realizable value was estimated to be only $312,000. Prepare all the journal entries that Blossom should make during 2024 related to the warehouse. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry isrequired,select Indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the Amounts. List debit entry before credit entry.)Blossom Company purchased a warehouse on January 1, 2019, for $480,000. At the time of purchase, Blossom anticipated that the warehouse would be used to facilitate the expansion of its product lines. The warehouse is being depreciated over 20 years and is expected to have a residual value of $60,000. At the beginning of 2024, the company decided that the warehouse would no longer be used and should be sold for its carrying amount. At the end of 2024, the warehouse still had not been sold, and its net realizable value was estimated to be only $312,000. If conservatives sell the warehouse in 2005 for $264000, what entry would be made for the sale?