Question

Exercise 11-16 Presented below is information related to equipment owned by Vaughn Company at December 31, 2017 Cost Accumulated depreciation to date 1,010,000 Expected future net cash flows Fair value $9,090,000 7,070,000 4,848,000 Assume that Vaughn will continue to use this asset in the future. As of December 31, 2017, the equipment has a remaining useful life of 4 years. 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 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 manually.) Account Titles and Explanation Debit Credit The fair value of the equipment at December 31, 2018, is $5,151,000. Prepare the journal entry (if any) necessary to record this increase in fair value. (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 manually.) Date Account Titles and Explanation Debit Credit Dec. 31 Question Attempts: o of 7 used

Answer 1

Date		Debit	Credit
31-dec-17	Loss on impairment	3232000
	Accumulated depreciation- equipment		3232000
	Calculation
	Cost		9090000
	Less: accumulated depreciation		1010000
	Carrying amount		8080000
	Fair value		4848000
	Loss on impairment		3232000
31-dec-18	Depreciation expenses	1212000
	Accumulated depreciation- equipment		1212000
	Calculation
	New carrying amount		4848000
	Useful life		4 year
	Depreciation per year		1212000
31-dec-18	No entry necessary. Restoration of any impairment loss is not permitted if the asset is held for use