Question

Presented below is information related to equipment owned by Suarez Company at December 31, 2017. Cost $ 9,000,000 Accumulated depreciation to date 1,000,000 Expected future net cash flows 7,000,000 Fair value 4,800,000 Assume that Suarez will continue to use this asset in the future. As of December 31, 2017, the equipment has a remaining useful life of 4 years. New attempt is in progress. Some of the new entries may impact the last attempt grading.Your answer is partially 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 enter an account title to record the transaction on December 31, 2017 Loss on Impairment enter a debit amount enter a credit amount enter an account title to record the transaction on December 31, 2017 Accumulated Depreciation-Equipment enter a debit amount enter a credit amount eTextbook and Media List of Accounts New attempt is in progress. Some of the new entries may impact the last attempt grading.Your answer is partially correct. Prepare the journal entry 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 enter an account title Depreciation Expense enter a debit amount enter a credit amount enter an account title Accumulated Depreciation-Equipment enter a debit amount enter a credit amount eTextbook and Media List of Accounts New attempt is in progress. Some of the new entries may impact the last attempt grading.Your answer is partially correct. The fair value of the equipment at December 31, 2018, is $ 5,100,000. 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 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 enter an account title to record the transaction on December 31, 2018 enter a debit amount enter a credit amount enter an account title to record the transaction on December 31, 2018 enter a debit amount

Answer 1

The asset fails the recoverability test : 4800000< 8000000

Cost	$       90,00,000
less: Accumulated depreciation	$       10,00,000
Net Book Value	$       80,00,000
Less: Fair value	$       48,00,000
Impairement Loss	$       32,00,000

Date	Account Description	Debit	Credit
31-Dec-17	Loss on Impairement	$ 32,00,000
	Accumulated Depreciation - Equipment		$ 32,00,000
	(To Record the impairement Loss)

Part b:

Revised Book Value of Assets	$       48,00,000
Remaining Useful Life	4 Years
Depreciation per Year	$       12,00,000

Date	Account Description	Debit	Credit
31-Dec-18	Depreciation Expenses	$ 12,00,000
	Accumulated Depreciation - Equipment		$ 12,00,000
	(To Record the impairement Loss)

Part c:

No entry required as restoration of any impairment loss is not permitted if the asset is held for use.