Entity E acquires an asset at January 1, 20X1 for CU100,000. At that date, the asset is estimated to have
a useful life of 20 years. The asset will be depreciated using the straight-line method. At the beginning of
20X3, the remaining useful life of that asset is re-estimated at 10 years. At the end of 20X5, the asset is
revalued (Entity E previously having determined that the fair value of the asset did not differ materially
from its carrying amount); its FV at that date is estimated to be CU84,000 and its gross carrying amount
is estimated to be CU150,000 (determined by reference to the FV of similar assets at the beginning of
their useful lives). Its estimated remaining useful life is unchanged.
Both at acquisition and subsequently, the asset is estimated to have a nil residual value.
Required (please provide your calculations. This will definitely help you with the grade in case an
excusable error is part of your solution) (email back to the professor):
1) For both US GAAP and IFRS, indicate the following amounts at the end of 20X5 (before the
revaluation and after the change in useful life):
US GAAP (Dr./Cr.) IFRS Dr./Cr.)
Gross carrying amount (4.525 pts. each)
Accumulated depreciation (4.525 pts. each)
Carrying amount (4.525 pts. each)
2) If Entity E selects the alternative under IAS 16:35(a) (disproportionate restatement) to restate
the gross carrying amount by reference to the observable market data, please provide the
journal entry to recognize this revaluation at the end of 20X5 after the change in useful life (4.55
pts. each):
Journal entry accounts Dr. CU’000 Cr. CU’000
3) Prepare the journal entry assuming Entity E chose to restate the gross carrying amount of the
asset proportionally to the change in carrying amount after the change in useful life (IAS
16:35(a)) (4.55 pts. each):
Journal entry accounts Dr. CU’000 Cr. CU’000
4) Prepare the journal entry assuming Entity E selected the alternative under IAS 16:35(b)
(elimination approach) after the change in useful life (4.55 pts. each):