Presented below is information related to equipment owned by Suarez Company at D
ID: 2457156 • Letter: P
Question
Presented below is information related to equipment owned by Suarez Company at December 31, 2014.
Suarez intends to dispose of the equipment in the coming year. It is expected that the cost of disposal will be $ 20,000 . As of December 31, 2014, the equipment has a remaining useful life of 4 years.
Prepare the journal entry (if any) to record the impairment of the asset at December 31, 2014.
Cost $ 9,000,000 Accumulated depreciation to date 1,000,000 Expected future net cash flows 7,000,000 Fair value 4,800,000Explanation / Answer
Carrying Amount = Cost - Accumulated Depreciation
= 9,000,000 - 1,000,000
= 8,000,000
Recoverable Amount = 7,000,000 - 20,000
= 6,980,000
Impairment = Carrying Value - Recoverable Amount
= 8,000,000 - 6,980,000
= 1,020,000
Statement of Proft & Loss Dr 1,020,000
To Provision for Impairment 1,020,000