AFS 11-2 Challenger Limited ( Unconsolidated subsidiary of Bronco Drilling Compa
ID: 2425981 • Letter: A
Question
AFS 11-2
Challenger Limited ( Unconsolidated subsidiary of Bronco Drilling Company Inc.)
Statement of Comprehensive Income for the year ended 31 December (Amounts in US dollars)
One of the major differences between IFRS and US GAAP is the revaluation of property , plant and equipment ( primarily it includes the revaluation of rigs). Challenger revalued its assets in 2008 but not in 2007. The gross income in fair value of the rigs in 2008 was an increase of $20,481,823.
Required
A. How often must a company revalue property, plant and equipment if it uses the revaluation model?
B. Explain the most likely reasons for the differences between the $15,378561 change in the revaluation reserve and the $20,481,423 (gross income in rigs). Prepare the journal entry to record the revaluation in 2008. Show where each account used in the journal entry should be reported in the financial statements.
C. Which financial statements would be affected if, during 2009 , the fair value of the PPE dropped by $25,000,000? Show the dollar amount and the direction of the change for each statement, assuming the reappraised assets to be, on average , 30% depreciated at the end of 2009.
2008 2007 (Loss)/Profit for the year $6,922,645.00 $1,616,154.00 Other comprehensive income Change in revaluation of rigs $15,378,561.00 $- Total comprehensive income $22,301,206.00 $16,161,154.00Explanation / Answer
A. How often must a company revalue property, plant and equipment if it uses the revaluation model?
Once a year ismust
B. Explain the most likely reasons for the differences between the $15,378561 change in the revaluation reserve and the $20,481,423 (gross income in rigs). Prepare the journal entry to record the revaluation in 2008. Show where each account used in the journal entry should be reported in the financial statements.
Most likely reason- value increased for market price enhancemennt for capacity of equipmennt increase.
Asset account Dr $15,378561
Revaluationn reserve $15,378561
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