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Prepare the journal entry at december to record asset

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Reference no: EM132610766

The information that follows relates to equipment owned by Headlands Limited at December 31, 2020:

Cost $7,740,000

Accumulated depreciation to date 860,000

Expected future net cash flows (undiscounted) 6,020,000

Expected future net cash flows (discounted, value in use) 5,461,000

Fair value 5,332,000

Costs to sell (costs of disposal) 43,000

Assume that Headlands will continue to use this asset in the future. As at December 31, 2020, the equipment has a remaining useful life of four years. Headlands uses the straight-line method of depreciation.

Assume that Headlands is a private company that follows ASPE.

Question a) 1. Prepare the journal entry at December 31, 2020, to record asset impairment, if any.

2. Prepare the journal entry to record depreciation expense for 2021.

3. The equipment's fair value at December 31, 2021 is $5.59 million. Prepare the journal entry, if any, to record the increase in fair value.

Question b) Repeat the requirements in (a) above assuming that Headlands is a public company that follows IFRS.

Reference no: EM132610766

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