Asked by Elizabeth Offer on Jul 11, 2024
Verified
Teapot, Ltd. is a foreign company that uses IFRS for its financial reporting. Teapot is a wholly-owned subsidiary of Davis Housewares Corp. which is a U.S. company that prepares its consolidated financial statements in accordance with U.S. GAAP. Teapot purchased a piece of equipment for $3,000,000 on January 1, 2020. The equipment has an overall useful life of 20 years and no salvage value. The equipment is comprised of the following three significant components, shown with their associated cost and useful life. 
As a corporate policy, Davis Housewares Corp. utilizes the straight-line method of depreciation for machinery and equipment and plans to extend this policy to Teapot, Ltd.Prepare the journal entry for the 2020 depreciation expense for Teapot, Ltd. based on IFRS accounting principles.
IFRS
International Financial Reporting Standards, a set of accounting standards developed by the International Accounting Standards Board (IASB) that are globally accepted.
Depreciation Expense
The allocation of the cost of a tangible asset over its useful life, reflecting wear and tear, deterioration, or obsolescence.
Straight-Line Method
A depreciation technique that allocates an equal portion of the cost of an asset to each year of its useful life.
- Understand the key differences between IFRS and U.S. GAAP in terms of financial reporting and depreciation methods.
- Grasp the components approach to depreciation under both IFRS and U.S. GAAP.
Verified Answer
CP
Christina PerryJul 15, 2024
Final Answer : 
($800,000 ÷ 20) + ($1,000,000 ÷ 5) + ($1,200,000 ÷ 10) = $40,000 + $200,000 + $120,000 = $360,000
($800,000 ÷ 20) + ($1,000,000 ÷ 5) + ($1,200,000 ÷ 10) = $40,000 + $200,000 + $120,000 = $360,000
Learning Objectives
- Understand the key differences between IFRS and U.S. GAAP in terms of financial reporting and depreciation methods.
- Grasp the components approach to depreciation under both IFRS and U.S. GAAP.