Smithson Ltd. prepares its financial statements according to IFRS. On March 30, 2018, the company purchased a franchise for $3,000,000. The franchise has a 10-year contractual life with no residual value. Smithson uses the straight-line amortization method for all intangible assets. On December 31, 2018, the end of the company's fiscal year, Smithson chooses to revalue the franchise. There is an active market for this particular franchise and its fair value on December 31 is $2,860,000.
Required:
1. Calculate amortization for 2018.
2. Prepare the journal entry to record the revaluation of the patent.
3. Calculate amortization for 2019.

Question

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The Answer of Smithson Ltd. prepares its financial statements according to IFRS. On March 30, 2018, the company purchased a franchise for $3,000,000. The franchise has a 10-year contractual life with no residual value. Smithson uses the straight-line amortization method for all intangible assets. On December 31, 2018, the end of the company's fiscal year, Smithson chooses to revalue the franchise. There is an active market for this particular franchise and its fair value on December 31 is $2,860,000.
Required:
1. Calculate amortization for 2018.
2. Prepare the journal entry to record the revaluation of the patent.
3. Calculate amortization for 2019.