Question

Marigold Corporation uses special strapping equipment in its packaging business. The equipment was purchased in January 2019 for $8.80 million and had an estimated useful life of 8 years with no residual value. In early April 2020, a part costing $770,000 and designed to increase the machinery’s efficiency was added. The machine’s estimated useful life did not change with this addition. By December 31, 2020, new technology had been introduced that would speed up the obsolescence of Marigold’s equipment. Marigold’s controller estimates that expected undiscounted future net cash flows on the equipment would be $5.54 million, and that expected discounted future net cash flows on the equipment would be $5.10 million. The fair value of the equipment at December 31, 2020, was estimated to be $4.93 million. Marigold intends to continue using the equipment but estimates that its remaining useful life is now four years. Marigold uses straight-line depreciation. Assume that Marigold is a private company that follows ASPE.

Prepare the journal entry to record asset impairment at December 31, 2020, if any. Round answers to 0 decimal places, e.g. 5,275. Date Account Titles and Explanation Debit Credit December 31, 2020 Loss on Impairment ????????????????????? Accumulated Impairment Losses - Equipment ???????????? I would like to know the calculations? As my answer is not correct for the entries?

Answer 1

January 2014 - 8800,000 Teecember 2014 (Depreiation - (1.100.000) Book value on Jan 2020 - 7,700,000 Apr 2020 (Depreciation 3 monte) - (275000) Book value on Apr 2020 7425000 + part cost 8195000 December 2020 (Depreciation) (1536563) Book value / carring cost 6658437 7 70000 18195000 9 ZX 7 Impairmeat loss = carring Amount - Expected undiscounted future net cash flows 6658437 - 5540000 1118437 279609 Dec 31, 2020 Loss on Impairment To Accumulated Impairment lossce 279609 [To sccord loss on Sepair meet for the year 2010]