Presented below is information related to non-current assets owned by Marley Com
ID: 2573702 • Letter: P
Question
Presented below is information related to non-current assets owned by Marley Company at December 31, 2015.
Equipment Copyright
Cost $7 000 000 $2 700 000
Accumulated depreciation to date 1 500 000
Carrying amount - 2 350 000
Value-in-use 5 000 000
Fair value less cost of sell 4 400 000
Recoverable amount - 1 500 000
Assume that Marley will continue to use both assets in the future. As of December 31, 2015, the equipment had a remaining useful of 4 years and the copyrights had a remaining useful life of 5 years. Please show all workings and attach in order for me to copy and paste.Please and thank yiu.
Required:
(a) Prepare the journal entries (if any) to record the impairment of the assets at December 31, 2015. (16 marks)
(b) Prepare the journal entries to record depreciation and amortization expense for 2016. (14 marks)
(c) The recoverable amounts at December 31, 2016, of the equipment is $5 750 000 and the copyrights is $1 600 000. Prepare the journal entries (if any) necessary to account for impairment. (16 marks)
(d) What is the amount for depreciation and amortization for 2017? (6 marks)
Explanation / Answer
a)
Impairment loss of Equipment as on December 31, 2015 = 7000000 - 1500000 - 4400000 = 1100000
Journal Entry:
Impairment loss DR 1100000
EquipmentCR 1100000
Impairment loss of Copyright as on December 31, 2015 = 2350000 -1500000 = 850000
Journal Entry:
Impairment loss DR 850000
Copt right CR 850000
b)
Depreciation on Equipment = 4400000/4 = 1100000
Amortisation on Copyright = 1500000/5 = 300000
Journal Entry for depreciation:
Depreciation DR 1100000
Accumulated Depreciation CR 1100000
Journal Entry for amortisation:
Amortisation DR 300000
Copyright CR 300000
c)
Book value of eqipment as on December 31, 2016 = 4400000 - 1100000 =3300000
Impairment loss of Equipment as on December 31, 2016 = 0 (as recoverable amount is higher than book value)
Journal Entry: NIL
Carrying amount of copyright as on December 31, 2016 = 1500000 - 300000 = 1200000
Impairment loss of Copyright as on December 31, 2016 = 0 (as recoverable amount is higher than carrying amount)
Journal Entry: NIL
d)
Depreciation on Equipment = 4400000/4 = 1100000
Amortisation on Copyright = 1500000/5 = 300000