DGD #9

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University of Ottawa *

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ADM 2342

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Accounting

Date

Jan 9, 2024

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pdf

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ADM 2342 2023 FALL SEMESTER DGD #9 Question No. 1 Place an “X” against, or insert a yellow highlight on, the best answer for each of the following five multiple-choice questions. Only one answer will be accepted for each question. If more than one choice is indicated, the question will not be marked. Each question is worth 3 marks. No account will be taken of any supporting calculations written. 1. Starburst Company began 2023 with capital assets of $172,000 and accumulated depreciation of $66,000. During 2023, capital assets were purchased for $81,000 and capital assets were sold for proceeds of $78,000. Depreciation expense for the year was $58,000. On December 31, 2023, Starburst Company had capital assets of $155,000 and accumulated depreciation of $102,000. What was the gain or loss on disposal of capital assets during 2023? a. $2,000 gain b. $2,000 loss c. $39,000 loss d. $58,000 loss e. None of the above 2. Starfruit Company recently adopted the Revaluation Model to account for its only building after acquisition. The following facts are presented at the time of the first revaluation: Before Revaluation Building Carrying Value 320,000 Building Accumulated Depreciation 80,000 Building Fair Value 280,000 Because this is the first year that the Revaluation Model is being used by Starfruit Company, the amount to be debited or credited to net income to record the revaluation would be: a. $0 b. $40,000 debit c. $40,000 credit d. $200,000 credit e. $200,000 debit
ADM 2342 2023 FALL SEMESTER DGD #9 Question No. 1 (continued) 3. Stardust Limited’s Statement of Financial Position as at December 31, 2023 included an asset classified as equipment with a cost of $77,000 and accumulated depreciation of $26,000. After performing its annual review for impairment, Stardust determined that the equipment’s value in use is $43,000 and its fair value is $51,000. Costs of disposal are $6,000. Stardust follows IFRS. If Stardust wanted to use the Rational Entity Impairment Model, what is the amount of impairment to be recorded? a. $8,000 b. $6,000 c. $3,000 d. $0 e. No impairment can be measured and recorded because the Rational Entity Impairment Model is only used under ASPE. 4. Starfish Company had acquired some machinery for $20,000 back in 2021. On March 1, 2023, when the machine had a net book value of $13,000, Starfish exchanged the machine for a more efficient machine owned by Rebhorn Company. The new machine had a list price of $29,000. A trade-in allowance of $8,000 was agreed upon between both companies. The fair value of the old machine was $4,000. How much was the gain or loss on the exchange for Starfish? a. $9,000 loss b. $13,000 gain c. $9,000 gain d. $13,000 loss e. None of the above 5. Stargaze Company was offered the following terms for the purchase of a new machine: a down payment of $6,000 on January 1, 2023 and semiannual payments of $6,000 starting on June 30, 2023 for the next 3½ years. Alternatively, Stargaze Company could pay cash for the machine and finance its acquisition using a loan from its local bank at an 8% annual interest rate. At what amount (rounded to the nearest dollar) should the machine be recorded on books of Stargaze Company on the acquisition date? a. $31,737 b. $35,238 c. $35,453 d. $42,012 e. None of the above
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