Question

ed to equipment owned by E11.16 (L03) (Impairment) Presented below is information related to equipm Suarez Company at December 31, 2020. Cost $9,000,000 Accumulated depreciation to date 1,000,000 Expected future net cash flows 7,000,000 Fair value 4,800,000

Answer 1

Solution :

a). Journal entry to record impairment of asset at Dec. 31, 2020

Loss on impairment ----------------- $ 32,00,000

   To Accumulated depreciation - equipment.     $ 32,00,000

Note : Asset fails recoverabilty test $ 70,00,000 < $ 80,00,000

Cost $ 90,00,000

Less : Accumulated depreciation . $ 10,00,000

_________________

Carrying amount. $ 80,00,000

Fair value. $ 48,00,000

So, loss on impairment. $ 32,00,000

b) . Journal entry to record depreciation expense for 2021

Depreciation expense ------------------- $ 12,00,000

   To Accumulated depreciation - equipment. $ 12,00,000

New carrying amount = $ 48,00,000

Useful life. = 4 years

Depreciation per year = $ 12,00,000

c) . No entry necessary. Restoration of impairment of loss is not permitted.