Presented below is information related to equipment owned by Sweet Company at De

Question

Presented below is information related to equipment owned by Sweet Company at December 31, 2017, Cost Accurmulated depreciation to date 1,180,000 Expactad future ne cash flows Fair value $10,620,000 8,26D,0D0 5,664,000 Assume that Sweet will contiue to use this asset in the future, As of December 31, 2017, the equipment has a remaining useful life of 5 years, Prepare the journal entry Cif arry) to record the impairment of the asset at December 31, 2017. (If no entry is required, select "No entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.) Date Account Titles and Explanation Debit Credit Det. 31 LTST OF ACCOUNTS Prepare the journal entry to record depreciation expense for 2018. (If no entry is required, select "No entry" for the account titles and enter O for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent Account Titles and Explanation Debit Credit VIDEOI STMTLAR EXERCISE The fair value of the equipment at December 31 18 18,0 0 Prepare the ou mal entry if any necessary to recare ths increasa in air value. If no entry is re u re are automatically indented when amount is entered. Do not indont manually.) seect- o entry for the account titles and enter 0 for the amo nts C dit account tit es Date Account Titles and Explanation Dec. 31

Explanation / Answer

1)

Journal entry to record impairment of asset as on December 31, 2017

                                                                                    Dr. ($)                           Cr. ($)

Loss on Impairment                                                      1,180,000

Equipment                                                                                                     1,180,000

(Being impairment loss on equipment on higher of net cash flow or fair value)

2)

Journal entry to record depreciation expense for year 2018

Depreciation                                                                                    1,652,000

Equipment                                                                                                                        1,652,000

(Being depreciation for the year provided on carrying amount of Equipment)

3)

Journal entry for new fair value of equipment as on December 31, 2018

Loss on Impairment                                                           590,000

Equipment                                                                                                               590,000

(Being impairment loss on equipment on fair value at current book value of $ 6,018,000)

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