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Question: In 2010 Gandoff Company purchased a coal mine for $30,000,000. Gandoff expected to be able to extract $100,000,000 worth of coal from the mine. By 2016 Gandoff had extracted 10% of the coal from the mine. During 2016, a new pollution law was passed which greatly impacted the Gandoff Company. With this new law, Gandoff Company expects to be able to only get $28,000,000 (present value $11,000,000) for their remaining coal.

a. Under GAAP is this asset impaired ? What value should Gandoff show this asset at?

b. Under IFRS is this asset impaired? What value should Gandoff show this asset at?

In 2018, The Froto Company developed a new coal filter which removes 100% of the pollution from burning coal! With this new invention Gandoff Company is convinced that it can sell its remaining coal for $95,000,000.

a) Under GAAP at what value does GandoffCompany show for the coal mine on its balance sheet?

b) Under IFRS at what value dues GandoffCompany show for the coal mine on its balance sheet?

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M92712724

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