30 minutes. Gain on sale and leaseback: (Differences-IFRS. Recognized immediatel
ID: 2566543 • Letter: 3
Question
30 minutes. Gain on sale and leaseback: (Differences-IFRS. Recognized immediately in net income (if operating lease); US. GAAP. Deferred and amortized over lease term (generally). Brazilian Ltda. sold a building to Banco Janerio on January 1, 2017, for 200,000 pesos and then leased it back under a 10-year lease agreement, which is accounted for as an operating lease. The building had a carrying amount of 150,000 pesos and a fair value of 200,000 pesos on the date of sale. Determine the appropriate accounting for this sale and leaseback for the years ending December 31, 2017, and December 31, 2018, under (1) IFRS and (2) U.S GAAP a. b. Prepare the entry(ies) that the U.S. parent would make on the December 31, 2017 and December 31, 2018, conversion worksheets to convert IFRS balances to U.S. GAAP Journal entries:Explanation / Answer
a) As the fair value exceeds the carrying amount of Building there is a gain on sale and leaseback of Building which will be treated as follows :-
1) As Per IFRS
Journal Entry for Sale and Lease Back in case of Operating Lease (Amt. in pesos)
Since annual Lease Payments are not mentioned in the Question the journal entry for annual lease payments ia not recorded.
2) As per U.S. GAAP
Journal Entry for sale and lease back (Amt. in pesos)
b) Journal Entry for Conversion (Amt. in pesos)
For both the years, conversion entries are independent thus in 2017 Income Statement is debited by 45,000 and in 2018 Income Statement is debited by 40,000.
Date Particulars Debit Credit January 1,2017 Bank A/c Dr. 200,000 To Sales 150,000 To Income Statement 50,000 (to record sale and lease back transaction's gain as sale price and fair value are equal and exceeds the carrying value so the difference is recorded immediately as gain.)Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.