land Buildings Leasehold Improvements

balance 100000 balance 800000 balance

land 621 1000000 Land 622 c 150000 extensive
commissio 60000 11000 wing ext
clearance 15000 8000
timber sold 5000 1000 improveme

Land 622 300000

clearance 30000

Balance 1405000 5000 1500000 Balance 170000 0 970000 Balance

Other items
Land 623 should be classified as inventory 600000
Royalty payment of 13000 should be classified under royalty expense
Leasehold Improvements machinery and equipment
500000 balance 700000
35000 invoice 75000
40000 freight 2000
unloading 1500
65000

140000 0 640000 Balance 78500 0 778500

Lumpsum purchase cost Legal fees Balance Depreciation
Building 39000 0.6 36000 700 36700 1835
Machinery 26000 0.4 24000 24000 3000

65000 60000 4835

Adjustment in 2011 related to 2009
RE 2400
PPE 2400
for adjusting the insurance

PPE 6310
Acc Depr 6310
Acc Depr 1475
RE 1475
to cancel the depr exp by client and record the correct depreciation expense

balance 09Addition balance 10Depreciation

Building 36700 10000 46700 2335
Machinery 24000 24000 3000
60700 70700 5335

Adjustment in 2011 related to 2010

RE 2000
PPE 2000
to adjust for the repair expense capitalized in 2010
PPE 6879
Acc Depr 6879
Acc Depr 1544
RE 1544
to cancel the depr exp by client and record the correct depr exp

balance 10Addition Deduction balance 11Depreciation

Building 46700 46700 2335 mach sold
machniner 24000 7000 800 30200 3775 Depreciation for 2 years
70700 6110 BV
cash
Adjustment in 2011 for the transactions in 2011 Loss
Repair expense 2000
PPE 2000
to adjust for the repair expense capitalized in 2011
Prepaid insurance 2800
PPE 2800
Insurance expense 1400
Prepaid insurance 1400
to adjust for the insurance expense recorded as PPE
PPE 7421
Depreciation exp 7421
to cancell the depreciation exp by client
Loss on mach sold 100
Acc depr 200
PPE 300
to adjust for the loss associated with the machinery sold
Depr exp 6110
Acc depr 6110
to record the correct depr exp
800 Journal Journal by client
200 Loss 100 cash 500
600 Cash 500 PPE 500
500 Acc depr 200
100 PPE 800
 Dep 05-10 BV
Factory 180000 36000 144000
machinery 1000000 300000 700000
844000
1 2 3 4 5 6 7 8
year 1 year 2 year 3 year 4 year 5 year 6 year 7 year 8
cash inflow 400000 400000 400000 400000 400000 400000 400000 400000
cash outflow 295000 295000 295000 295000 295000 295000 295000 295000
net cashflows 105000 105000 105000 105000 105000 105000 105000 105000

DF 12% 0.892857 0.797194 0.71178 0.635518 0.567427 0.506631 0.452349 0.403883

PV 93750 83705.36 74736.93 66729.4 59579.82 53196.27 47496.67 42407.74
Total PV 521602.2

since undiscounted CF 840000 is less than the BV 844000 there will be an impairment
New value 521602.2 impairment loss BV 844000
allocated t Factory 180000 0.152542 79566.43 FV 521602.2
Mach 1000000 0.847458 442035.7 Loss 322397.8
1180000

Journal entries
Loss on impariment 322397.8
Factory new val 79566.43
Mach new val 442035.7
Acc depr - fact 36000
Acc depr - mach 300000
fact old val 180000
mach old val 1000000

1 2 3 4 5 6
year 1 year 2 year 3 year 4 year 5 year 6
cash inflow 400000 400000 400000 400000 400000 400000
cash outflow 295000 295000 295000 295000 295000 295000
net cashflows 105000 105000 105000 105000 105000 105000

DF 16% 0.862069 0.743163 0.640658 0.552291 0.476113 0.410442

PV 90517.24 78032.1 67269.06 57990.57 49991.87 43096.44
Total PV 386897.3

impairment loss BV 844000

FV 386897.3
Loss 457102.7

If the disc rate is 16% and the cash flows are expected to continue only for 6 years, the loss is greater

If the disc rate is 12% and the time frame is 8 years, and the company expects to save 10,000 each year, there will be no impa
as BV 844000 is still greater than the undiscounted cash flows of 840000 plus 80000

If the FV of assets cost to selltrigger value

Building 120000 5000 115000
Mach 450000 12000 438000
570000 553000
As the Bv is 844000 which is higher than the trigger value, then under IFRS there will be impairment loss
BV 844000
Trigger value 553000
Loss 291000
ach year, there will be no impairment
920000
be impairment loss
 Balance Adjustment Balance
Description Additions Deduction per books D K after adjustments
Land 22500 5000 27500 10000 -5000 32500
Land improvements 5000 5000
Buildings 120000 17500 137500 40000 -1500 176000
Machinery and Eq 385000 40400 26000 399400 -22000 377400

acc depr land improvements 250 250

Acc Depr Buildings 60000 5150 65150 -5150 5920 65920
Acc Depr mach and Eq 173250 39220 212470 -58420 38120 192170

Depreciation SL Building 25
others 10
addition or deduction half

Adjustment entries
Liabilities 1500 Asset Retirement calculation
Buildings 1500 Cost
to adjust the overvalue of buildings Depr 06
07
Land improvements 5000 08
Land 5000 09
to adjust for land improvement 10

Land 10000 BV
Buildings 40000 Cash
Donated Capital 50000 loss
to adjust for the donated assets
Entries Acc Depr
Acc Depreciation buildings 5150 Depr exp
Acc Depreciation Mach and Eq 39220
Dep exp buildings 5150 cash
Dep exp mach and eq 39220 loss
to cancel the depreciation exp by client

Depreciation exp 2400 Recorded

Acc depr-mach and eq 2400 cash
Acc depr-mach and eq 19200
loss 2800
mach and eq 22000
to adjust for the retirement of mach

Depr exp-buildings 5920 Dep buildings

Depr exp-land improvements 250
depr exp - mach and eq 38120
Acc depr buildings 5920
Acc depr land improvement 250 Depr machinery
Acc depr mach and eq 38120
irement calculation
48000
2400
4800
4800
4800
2400
19200
28800
26000
2800

19200
2400
Acc depr 2400
26000
2800
Mach and eq 48000

26000
mach and eq 26000

existing 4800
additions 320
additions 800

deduction 2400
existing le 33700
addition 2020
Land A and building A
Lumpsum purchase 812500
Land 72000 0.08 65000 Cost of land #1
building 828000 0.92 747500 cost of building #2
900000

Depreciation for one year 14000 Depr mach A 10

cost 747500 9
salvage 47500 8
700000 7
useful life: 50 #3 6
Depreciation 2011 14000 #4 5
4
Land B cost 75000 3
cost of demolish 10400 2
total 85400 cost of land B #5 1
Depreciation building - #6 55

Donated Eq 16000 #7
Depreciation 2010 2400 #8
Deprecaition 2011 2040 #9

Machinery A 110000
repair exp 11000
cost 99000 #10
salvage 5500
Depr base 93500

Machinery B
cost 4000
annuity 24578.27 6.144567 test
costs 28578.27 #13
Depreciation 1905.218 #14
year 1 0.181818 Depr 2010 17000 #11
year 2 0.163636 Depr 2011 5100 #12