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.On December 31, 2020, Wave Corp. a foreign subsidiary of Pepper Corp., had a bank overdraft of $30,000 on one of its bank accounts. Bank overdrafts are an integral part of Wave's cash management policy.1) Prepare the journal entry to convert the foreign subsidiary from its IFRS financial statements to U.S.GAAP financial statements.2) Briefly explain why this journal entry is required.

Question

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.On December 31, 2020, Wave Corp. a foreign subsidiary of Pepper Corp., had a bank overdraft of $30,000 on one of its bank accounts. Bank overdrafts are an integral part of Wave's cash management policy.1) Prepare the journal entry to convert the foreign subsidiary from its IFRS financial statements to U.S.GAAP financial statements.2) Briefly explain why this journal entry is required.

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The Answer of 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.On December 31, 2020, Wave Corp. a foreign subsidiary of Pepper Corp., had a bank overdraft of $30,000 on one of its bank accounts. Bank overdrafts are an integral part of Wave's cash management policy.1) Prepare the journal entry to convert the foreign subsidiary from its IFRS financial statements to U.S.GAAP financial statements.2) Briefly explain why this journal entry is required.