ACCT1054 financial accounting and reporting

QUESTION ONE

1) Cost = $ 2,000,000 (1,850,000+50,000+60,000+40,000)

2) 

DR  Machine 2 mil

CR  Cash 2 mil

QUESTION TWO

1) Recoverable amount is the remaining future economic benefit. Calculated as the higher between net selling price and value in use.

2) Recoverable amount is $400,000

3) Impairment loss of $600,000 has to be recorded as

4) DR Impairment loss 600,000

CR Accum. Impair. Loss   600,000

5) On profit the effect is to decrease the profit / on loss it to increase it even more.

QUESTION THREE

The Special cutting machine should be recorded at the fair value of purchase consideration. This would be calculated as follows:

(b) The accounting entries to record the acquisition would be: