Presented below is information related to equipment owned by Suarez Company at D
ID: 2420943 • Letter: P
Question
Presented below is information related to equipment owned by Suarez Company at December 31, 2014.
Assume that Suarez will continue to use this asset in the future. As of December 31, 2014, the equipment has a remaining useful life of 5 years.
Prepare the journal entry to record depreciation expense for 2015.
The fair value of the equipment at December 31, 2015, is $7,129,800. Prepare the journal entry (if any) necessary to record this increase in fair value.
Cost $ 12,582,000 Accumulated depreciation to date 1,398,000 Expected future net cash flows 9,786,000 Fair value 6,710,400Explanation / Answer
Cost of the asset $ 12,582,000
Less: Accumulated Depreciaton 1,398,000
Loss on impairment 4,473,600
Depreciaiton for 2015 (6,710,400/5) 1,342,080
1. Journal entry to record depreciation expensss for 2015
Description of account Debit Credit
Depreciaton expense a/c $ 1,342,080
Accumulated Depreciaton $ 1,342,080
2. Journal entry to record the increase in fair value : No journal entry is required to record increase in fair value of Equipment on December 31, 2015. Restoration of any ioss on impairment is not permitted.
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