Presented below is information related to equipment owned by Suarez Company at December 31, 2017.
Cost $9,000,000 Accumulated depreciation to date 1,000,000 Expected future net cash flows 7,000,000 Fair value 4, 800,000 Assume that Suarez will continue to use this asset in the future. As of December 31, 2017, the equipment has a remaining useful life of 4 years. Instructions (a) Prepare the journal entry (if any) to record the impairment of the asset at December 31, 2017. (b) Prepare the journal entry to record depreciation expense for 2018. (c) The fair value of the equipment at December 31, 2018, is $5, 100,000. Prepare the journal entry (if any) necessary to record this increase in fair value.
Answer and Explanation:
The journal entries are shown below:
But before that following calculations need to be done
For impairment loss
Less: Accumulated Deprecation-equipment $1,000,000
Net Value $8,000,000
Less: Fair value $4,800,000
Loss on Impairment $3,200,000
For depreciation expense
Fair value $4,800,000
Depreciation Expenses$ 1,200,000
The journal entries are as follows:
1 Loss on Impairment $3,200,000
To Accumulated Deprecation-equipment$3,200,000
(being loss on impairment is recorded)
2 Depreciation Expenses $1,200,000
To Accumulated Deprecation-equipment $1,200,000
(Being depreciation expense is recorded)
3 No Journal Entryis required
the answer is 4 : )
hope i out!