Reference no: EM131582907

Intermediate Accounting Assignment - Impairment, Assets Held for Sale and Discontinued Operations, Investments in Financial Instruments

Problem 1 - Anastasia Inc. has identified indicators of possible impairment on a depreciable asset and an intangible asset.

Information on each of these is provided below:

Depreciable asset -
Building	$560,000
Accumulated depreciation	(300,000)
Carrying value	$260,000
Undiscounted future cash flows from use of asset	$270,000
Value in use	220,000
Fair value	240,000
Costs of disposal	(12,000)
Indefinite Life Intangible Asset -
Carrying value	$120,000
Fair value	90,000
Direct costs to dispose of the trademark	(20,000)
Value in use	110,000

Required - Prepare any impairment loss journal entries required under IFRSs and under ASPE. (Note that for ASPE, the first step is assumed met when dealing with an indefinite life intangible asset, i.e. just like goodwill).

Problem 2 - The partial statement of comprehensive income for Huppmann Ltd., a publicly accountable entity, for the year ended December 31, 20x1, is as follows:

Sales	$26,000,000
Cost of goods sold	(15,000,000)
Gross margin	11,000,000
Operating expenses	7,600,000
Operating income	3,400,000
Income taxes (30%)	1,020,000
Net income	$  2,380,000

In August 20x1, the company's board made a decision to sell one of its six divisions. In September the division was put up for sale with a listing price of $9 million. The division being sold had revenues of $3.4 million, cost of goods sold of $2.3 million and operating expenses of $850,000. These amounts are included in the above statement of comprehensive income.

The carrying value of the net assets of the division were $9 million, and the fair market value of the division is estimated to be $8.5 million. The costs to sell the division are expected to be 12% of the fair market value of the net assets. These amounts have not been taken into consideration in preparing the statement of comprehensive income above.

Required - Prepare a revised statement of comprehensive income.

 Problem 3 - The Lannister Corporation, a publicly accountable entity, had the following investments as at December 31, 20x2:

Company	Type	Classification	Original Cost	Carrying Value	Fair Value
Arryn Corp.	Shares	FVPL	$65,000	$61,000	$58,000
Baratheon Co.	Shares	FVPL	105,000	112,000	125,000
Bolton Inc.	Shares	FVOCI	82,000	88,000	106,000
Frey Inc.	Shares	FVOCI	95,000	80,000	88,000
Greyjoy Co.	Bonds	FVOCI	210,106	210,106	210,106

The Greyjoy Co. bonds were purchased on December 31, 20x2. The bonds have a face value of $200,000, pay interest of 4% semiannually (Jun 30 & Dec 31) and mature on December 31, 20x19. Bond issue costs were capitalized to the FVOCI investment account.

The following transactions took place in 20x3:

Feb 4 - Sold the Baratheon shares for $130,000 less $3,200 in brokerage fees Mar 31 Purchased shares of Martell Inc. for $165,000 plus $4,500 in brokerage fees. The shares are classified as FVPL.

April 20 - Sold the Frey Inc. shares for $98,000 less $2,800 in brokerage fees.

Aug 12 - Purchased shares of Stark Co. for $45,000 plus $2,000 in brokerage fees. The shares are classified FVOCI.

Dec 31 - The fair values of the investments on hand are as follows:

Arryn Corp.         $  55,000

Bolton Inc.          115,000

Greyjoy Co.        206,000

Martell Inc.         173,500

Stark Co.              39,500

Required -

a) Prepare the journal entries to record all 20x3 transactions for the investments above. When preparing the December 31, 20x3 fair value adjustment entry, write two journal entries only: one for the total fair value adjustment on FVPL investments and one for the total fair value adjustment on FVOCI investments. Do not write a separate journal entry for each individual investment.

 b) Assume that Lannister's net income for the year ended December 31, 20x3 is $3,500,000. Prepare the bottom portion of the Statement of Comprehensive Income starting with the net income line.

c) Prepare a t-account showing the transaction in the A•OCI account from the beginning to the end of the year. Prove the ending balance.

d) At the end of 20x5 the Greyjoy Co. bonds were trading at 104.5. Write all journal entries for the bonds for the year ended December 31, 20x5.