The information that follows relates to equipment owned by Buffalo Limited at December 31, 2023: Cost Accumulated depreciation to date Expected future net cash flows (undiscounted) Expected future net cash flows (discounted, value in use) Fair value Costs to sell (costs of disposal) $9,720,000 1,080,000 7,560,000 6,858,000 6,696,000 54,000 At December 31, 2023, Buffalo 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 $54,000.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Please answer the following question

 

Must choose from the following LIST OF ACCOUNTS:

 

Accumulated Depletion

Accumulated Depreciation - Automobiles

Accumulated Depreciation - Buildings

Accumulated Depreciation - Equipment

Accumulated Depreciation - Furniture and Fixtures

Accumulated Depreciation - Machinery

Accumulated Depreciation - Vehicles

Accumulated Impairment Losses - Building

Accumulated Impairment Losses - Equipment

Accumulated Impairment Losses - Land

Accumulated Impairment Losses - Machinery

Accumulated Impairment Losses - Mine

Accumulated Impairment Losses - Patents

Accumulated Impairment Losses - Tools and Dies

Accumulated Impairment Losses - Vehicles

Asset Retirement Obligation

Buildings

Cash

Common Shares

Contribution Expense

Cost of Goods Sold

Deferred Revenue - Government Grants

Depreciation Expense

Equipment

Furniture and Fixtures

Gain on Disposal of Automobiles

Gain on Disposal of Building

Gain on Disposal of Equipment

Gain on Disposal of Furniture and Fixtures

Gain on Disposal of Machinery

Gain on Disposal of Vehicles

Gain on Sale of Land

Interest Expense

Interest Pavable

Inventory

Investment Property

Land

Liability for Site Restoration

Loss on Disposal of Automobiles

Loss on Disposal of Building

Loss on Disposal of Equipment

Loss on Disposal of Machinery

Loss on Disposal of Vehicles

Loss on Expropriation

Loss on Impairment

Loss on Sale of Land

Machinery

Mineral Resources

No Entry

Notes Payable

Oil Property

Recovery of Loss from Impairment

Repairs and Maintenance Expense

Retained Earnings

Revaluation Surplus (OCI)

Revenue - Government Grants

Royalty Expense

Vehicles

The information that follows relates to equipment owned by Buffalo Limited at December 31, 2023:
Cost
Accumulated depreciation to date
Expected future net cash flows (undiscounted)
Expected future net cash flows (discounted, value in use)
Fair value
Costs to sell (costs of disposal)
(a1-a3)
1.
At December 31, 2023, Buffalo 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 $54,000.
2.
3.
Your answer is correct.
Assume that Buffalo is a private company that follows ASPE. (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. List all debit
entries before credit entries.)
(2)
No. Account Titles and Explanation
(1)
(3)
Loss on Impairment
Accumulated Impairment Losses - Equipment
Prepare the journal entry at December 31, 2023, to record asset impairment, if any.
Prepare the journal entry to record depreciation expense for 2024.
Assume that the asset was not sold by December 31, 2024. The equipment's fair value (and recoverable amount) on this
date is $7.02 million. Prepare the journal entry, if any, to record the increase in fair value. It is expected that the costs of
disposal will total $54,000.
No Entry
$9,720,000
1,080,000
7,560,000
No Entry
6,858,000
Accumulated Impairment Losses - Equipment
6,696,000
Recovery of Loss from Impairment
54,000
Debit
1998000
324000
Credit
1998000
0
324000
Transcribed Image Text:The information that follows relates to equipment owned by Buffalo Limited at December 31, 2023: Cost Accumulated depreciation to date Expected future net cash flows (undiscounted) Expected future net cash flows (discounted, value in use) Fair value Costs to sell (costs of disposal) (a1-a3) 1. At December 31, 2023, Buffalo 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 $54,000. 2. 3. Your answer is correct. Assume that Buffalo is a private company that follows ASPE. (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. List all debit entries before credit entries.) (2) No. Account Titles and Explanation (1) (3) Loss on Impairment Accumulated Impairment Losses - Equipment Prepare the journal entry at December 31, 2023, to record asset impairment, if any. Prepare the journal entry to record depreciation expense for 2024. Assume that the asset was not sold by December 31, 2024. The equipment's fair value (and recoverable amount) on this date is $7.02 million. Prepare the journal entry, if any, to record the increase in fair value. It is expected that the costs of disposal will total $54,000. No Entry $9,720,000 1,080,000 7,560,000 No Entry 6,858,000 Accumulated Impairment Losses - Equipment 6,696,000 Recovery of Loss from Impairment 54,000 Debit 1998000 324000 Credit 1998000 0 324000
Repeat the requirements in (a) above assuming that Buffalo is a public company that follows IFRS, and that the asset meets all
criteria for classification as an asset held for sale. (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. List all debit entries before
credit entries.)
No. Account Titles and Explanation
(1)
(2)
(3)
Debit
Credit
Transcribed Image Text:Repeat the requirements in (a) above assuming that Buffalo is a public company that follows IFRS, and that the asset meets all criteria for classification as an asset held for sale. (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. List all debit entries before credit entries.) No. Account Titles and Explanation (1) (2) (3) Debit Credit
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