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BE 11-1Depreciable Amount or Depreciation Base = ($24,000 + $200 + $125 + $500 + $475) $3,000 = $22,300.

BE 11-2

(a)

$60,000 $6,000

= $6,7508

(b)$60,000 $6,000

X 4/12 = $2,2508

BE 11-3(a) $60,000 X 25%* = $15,000

(b) ($60,000 X 25%) X 3/12 = $3,750

* Rate on declining balance = (1 8) X 2 = 25%

BE 11-4

2011:($48,000 $3,000) X 52,000

= $8,509275,000

2012:($48,000 $3,000) X 65,000

= $10,636275,000

Alternatively, a rate per km may be computed ($.1636) and this amount applied to the kmdriven in each year to determine the expense.BE 11-5(a) ($60,000 $6,000) X 8/36 = $12,000

(b) [($60,000 $6,000) X 8/36] X 9/12 = $9,000

BE 11-6Inventory ................................................................................. 97,650

Accumulated Depletion .............................................. 84,150Liability for Future Site Restoration .......................... 13,500*

$500,000 + $125,000 + $75,000 $157,500= $108.50 per tonne

5,000

900 X $108.50 = $97,650

*Liability for Future Site Restoration:

$75,000 = $15.00 per tonne5,000

900 X $15.00 = $13,500

Note: It is assumed that the site restoration costs are not a function of mining the ore.Under IFRS, any site remediation costs associated with production are charged toinventory as a product cost when the site is disfigured. This differs from Canadianprivate entity GAAP which has the estimate of the restoration costs added to the originalasset acquired.

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BE 11-7

Annual depreciation expense: ($7,000 $1,000)/5 = $1,200

Carrying amount, 1/1/12: $7,000 (2 x $1,200) = $4,600

Depreciation expense, 2012: ($4,600 $500)/2 = $2,050

BE 11-8

Recoverability test:Future net cash flows ($500,000) < Carrying amount ($540,000); therefore, the

asset has been impaired.

Journal entry:Loss on Impairment ................................................... 140,000

Accumulated Impairment Losses ...................... 140,000($540,000 $400,000)

BE 11-9

No entry. Under the cost recovery impairment model, an impairment loss is not restoredfor property, plant, and equipment held for use.

BE 11-10

The recoverable amount is the higher of (1) the assets value in use and (2) its fair valueless costs to sell. In this case, even though the assets were scrapped on January 1, 2012,the value-in-use at November 30, 2011, was $6 million, which was higher than the fairvalue less costs to sell and their carrying amount of $5 million. Therefore, the assets arenot impaired as of the date of the financial statements.

Note: The scrapping of the assets should be disclosed as a postbalance sheetsubsequent event if material.

BE 11-11

(a)

At December 31, 2011:

The recoverable amount is $425,000 [the greater of the assets (1) value in use of$425,000 and (2) the fair value less costs to sell, $400,000].

Impairment:Carrying amount ........................................................ $500,000Less: Recoverable amount ....................................... 425,000Impairment loss ......................................................... $ 75,000

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Loss on Impairment ................................................... 75,000Accumulated Impairment Losses ...................... 75,000

($500,000 $425,000)

(b)

At December 31, 2012:

Accumulated Impairment Losses .............................. 75,000Recovery of Impairment Losses ........................ 75,000

($500,000 $425,000)

The reversal of the impairment loss is limited to the amount required to increase theassets carrying amount to what it would have been if the impairment loss had not beenrecorded. In this case the original cost of the land was $500,000 and the amount of theimpairment recorded to date is $75,000. Since the current recoverable amount of$550,000 (greater of the value in use of $550,000 and fair value less costs to sell of$480,000) is greater than the original cost of the land, before impairment was recorded,

the recovery entry is limited to $75,000.

BE 11-12

(a)

Under private entity GAAP: Because the buildings and equipment are specialized andcannot generate cash-flows on their own, they are combined into an asset group with theland. The carrying amount of the asset group is $60,000. The cost recovery modelapplies a recoverability test to determine if there is impairment. The carrying amount of$60,000 is compared to the undiscounted cash flows of $65,000. Since the carryingamount can be recovered (i.e. the undiscounted cash flows are greater than the carrying

amount), there is no impairment, and no impairment loss is recorded.

(b)Under the IFRS rational entity model, the carrying amount ($60,000) of the cash-generating group (CGU) is compared to the recoverable amount of $47,000 (the higher ofthe CGUs value in use of $47,000 and the CGUs fair value less costs to sell of $35,000).

Carrying amount of CGU .................................. $60,000Less: Recoverable amount ............................. 47,000Impairment loss ................................................ $13,000

The impairment loss is then allocated to the individual assets in the group, but no

individual asset can be reduced below the highest of (1) its value in use, (2) its fair valueless costs to sell, or (3) zero. In this case, the land is not impaired (recoverable amount isgreater than carrying amount), thus the $13,000 loss is allocated to the buildings andequipment.

Carrying LossAllocation: Amount Proportion Allocation

Buildings $30,000 30/40 $ 9,750Equipment 10,000 10/40 3,250

$40,000 $13,000

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BE 11-12 (Continued)

The journal entry to record the impairment is:

Loss on Impairment ................................................... 13,000Accumulated Impairment Losses

Building ............................................................. 9,750Accumulated Impairment LossesEquipment ......................................................... 3,250

BE 11-13

(a) Depreciation Expense ($3,000 X 8/12).................... 2,000Accumulated Depreciation .......................... 2,000

(b) Cash ...................................................................... 10,500

Accumulated Depreciation ..................................... 11,000Machinery ..................................................... 20,000Gain on Disposal of Machinery ................... 1,500

BE 11-14

(a) Depreciation Expense ($3,000 X 8/12).................... 2,000Accumulated Depreciation .......................... 2,000

(b) Cash ...................................................................... 5,200Loss on Disposal of Machinery .............................. 3,800

Accumulated Depreciation ..................................... 11,000Machinery ..................................................... 20,000

BE 11-15

(a) Asset turnover ratio:$2,687

= 1.22 times$1,923 + $2,487

2

(b) Profit margin:$52

= 1.94%$2,687

(c) Rate of return on asset:

1. 1.22 X 1.94% = 2.36%, or

2. $52= 2.36%

$1,923 + $2,4872

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BE 11-16

2011: $45,000 X 20% X 1/2 = $ 4,5002012: $40,500 X 20% = 8,1002013: $32,400 X 20% = 6,480

2014: $25,920 X 20% = 5,184