Question

After recording depreciation for the current year, Media Mania Incorporated decided to discontinue using its printing equipment. The equipment had cost $738,000, accumulated depreciation was $515,000, and its fair value (based on estimated future cash flows from selling the equipment) was $36,000. 1. Determine whether the equipment is impaired. 2. Prepare the journal entries to record the impairment in asset if any. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Determine whether the equipment is impaired. The fair value is and the book value is Therefore this asset impaired.

Answer 1

Cost of equipment = $738,000

Accumulated depreciation = $515,000

Book value of equipment = Cost of equipment - Accumulated depreciation

= 738,000-515,000

= $223,000

Fair value of equipment = $36,000

impairment loss = Book value of equipment - Fair value of equipment

= 223,000-36,000

= $187,000

The fair value is

$36,000

and the book value is

$223,000

, Therefore this asset

has

impaired.

2.

Date	General Journal	Debit	Credit
A	Accumulated depreciation	$515,000
	Equipment		$515,000
	( To record the entry to remove accumulated depreciation )

Date	General Journal	Debit	Credit
B	Impairment loss	$187,000
	Equipment		$187,000
	( To record impairment loss)

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