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Bridgeport Corp., a small company that follows ASPE, owns machinery that cost $945,000 and has accumulated...

Bridgeport Corp., a small company that follows ASPE, owns machinery that cost $945,000 and has accumulated depreciation of $360,000. The undiscounted future net cash flows from the use of the asset are expected to be $561,000. The equipment’s fair value is $455,000. Using the cost recovery impairment model, prepare the journal entry, if any, to record the impairment loss.

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Answer #1

Cost of machinery = $945,000

Accumulated depreciation = $360,000

Carrying value of machinery = Cost of machinery - Accumulated depreciation

= 945,000 - 360,000

= $585,000

Undiscounted future net cash flows = $561,000

Since undiscounted future net cash flows are less than Carrying value of machinery, hence the machinery is impaired.

Fair value of equipment = $455,000

Impairment loss = Carrying value of machinery - Fair value of equipment

= 585,000 - 455,000

= $130,000

Journal

Impairment loss 130,000
Accumulated Impairment Loss - Equipment 130,000

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