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On December 31, 2006, Jones Company sold manufacturing equipment to Steel Corporation. Steel Corporation gave Jones Company a 5 year $200,000, zero interest note. The market rate of interest for a note with similar risks is 10%. At December 31, 2008 Jones Company reviews its financial assets for impairment. Jones Company concludes that the value of the note is impaired and it only expects to collect $150,000 of the principal at maturity. By December 31, 2009 Jones Company has determined that $10,000 of the impairment loss on the manufacturing equipment should be reversed.

Prepare the appropriate journal entries for December 31, 2008 and December 31, 2009 according to

a) IFRS, assuming the direct method is used to recognize impairments

b) US GAAP.

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M992159

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