On April 1, 2014, Lombardi Corp. was awarded $460,000 cash as compensation for the forced sale of its land and building, which were directly in the path of a new highway. The land and building cost $60,000 and $280,000, respectively, when they were acquired. At April 1, 2014, the accumulated depreciation for the building amounted to $165,000. On August 1, 2014, Lombardi purchased a piece of replacement property for cash. The new land cost $160,000 and the new building cost $410,000. The new building is estimated to have a useful life of 20 years, physical life of 30 years, residual value of $230,000, and salvage value of $75,000. Lombardi prepares financial statements in accordance with IFR5.
(a) Prepare the journal entries to record the transactions on April! and August 1, 2014.
(b) How would the transactions on April 1 and August 1, 2014, affect the income statement for 2014? Would the effect be different if Lombardi prepared financial statements in accordance with ASPE?
(c) Prepare any journal entries required at December 31, 2014.