5 Dowa, Ltd. is a foreign company that uses IFRS for its financial reporting. Do

Question

5 Dowa, Ltd. is a foreign company that uses IFRS for its financial reporting. Dowa isa wholly-owned subsidiary of Ide Corp. which is a U.S. company that prepares its consolidated financial statements in accordance with U.S. GAAP. Dowa purchased a piece of equipment for 2,000,000 on January 1, 2017. The equipment is comprised of the following three significant components, shown with their associated cost and useful life. (Note: You must show your work to receive extra credit.) Housing Control Unit Motor Useful Life 20 years 5 years 10 years 1,000,000 As a corporate policy, Ide Corp. utilizes the straight-line method of depreciation for machinery and equipment and plans to extend this policy to Dowa, Ltd. a) Prepare the journal entry for the 2017 depreciation expense for Dowa, Ltd. based on IFRS accounting principles. b) Prepare the journal entry for the 2017 depreciation expense for Ide Corp. based on U.S. GAAP c) Prepare the conversion worksheets to convert IFRS balances to U.S. GAAP d) Prepare the journal entry to convert the 2017 Dowa, Ltd. financial statements from IFRS to U.S. GAAP

Explanation / Answer

Given Components

Housing - 400000 - useful life 20 yrs

Control Unit - 600000 - useful life 5 yrs

Motor - 1000000 - useful life 10 yrs

Rate Of Depreciation = 1 / Useful Life * 100%

Depreciation = Depreciable Valvue * Rate Of Depreciation

Depreciable Value = Cost - Salvaged Value

Now,

For Housing

Rate Of Depreciation = 1 / 20 * 100 %

= 5%

For Unit Control

Rate Of Depreciation = 1 / 5 * 100 %

= 20 %

For Motor

Rate Of Depreciation = 1 / 10 * 100%

= 10%

a)

b)

c)

Worksheet Conversation

d)

Journal Entry for Dowa Ltd based on IFRS Accounting Principles Date Particulars Debit Credit 1 Housing A/c 400000 To Cash 400000 (For Housing purchased) 2 Depriciation Expenses A/c 20000 To Accumulated Depriciation A/c 20000 (For depriciation @ 5% on 400000) 3 Control Unit A/c 600000 To Cash 600000 (For Control Unit purchase) 4 Depriciation Expenses A/c 120000 To Accumulated Depriciation A/c 120000 (For depriciation @ 20% on 600000) 5 Motor A/c 1000000 To Cash 1000000 (For Motor purchase) 6 Depriciation Expenses A/c 100000 To Accumulated Depriciation A/c 100000 (For depriciation @ 10% on 1000000)

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