Question

Exercise 11-17 (Part Level Submission) Presented below is information related to equipment owned by Pharoah Company at December 31, 2017. Cost $9,630,000 Accumulated depreciation to date 1,070,000 Expected future net cash flows 7,490,000 Fair value 5,136,000 Pharoah intends to dispose of the equipment in the coming year. It is expected that the cost of disposal will be $21,400. As of December 31, 2017, the equipment has a remaining useful life of 4 years. Warning Don't show me this message again for the assignment Ok  Cancel   (a) Your answer is correct. Prepare the journal entry (if any) 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 Dec. 31 Loss on Impairment 3445400 Accumulated Depreciation-Equipment 3445400 Warning Don't show me this message again for the assignment Ok  Cancel   Show List of Accounts Show Solution SHOW ANSWER HIDDEN Show Answer Link to Text Attempts: 1 of 3 used (b) Your answer is correct. Prepare the journal entry (if any) to record depreciation expense for 2018. (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.) Account Titles and Explanation Debit Credit No Entry 0 No Entry 0 Warning Don't show me this message again for the assignment Ok  Cancel   Show List of Accounts Show Solution SHOW ANSWER HIDDEN Show Answer Link to Text Attempts: 2 of 3 used (c) The asset was not sold by December 31, 2018. The fair value of the equipment on that date is $5,671,000. Prepare the journal entry (if any) necessary to record this increase in fair value. It is expected that the cost of disposal is still $21,400. (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 Dec. 31

Answer 1

(a)

Date	Account title and Explanation	Debit	Credit
Dec.31	Loss on impairment	$        34,45,400
	Accumulated depreciation - Equipment		$        34,45,400

(b)

Date	Account title and Explanation	Debit	Credit
	No entry
	No entry

(c)

Date	Account title and Explanation	Debit	Credit
Dec.31	Accumulated depreciation - Equipment	$          5,35,000
	Gain in value of Equipment (Impairment reversal)		$          5,35,000

Carrying amount	$        51,14,600
Recoverable amount
Fair value	$        56,71,000
Less: Selling price	$            (21,400)
Recoverable amount	$        56,49,600
Reversal of Impairment loss (5649600-5114600)	$          5,35,000