Presented below is information related to equipment owned by Suarez Company at D

Question

Presented below is information related to equipment owned by Suarez Company at December 31, 2014.

Suarez intends to dispose of the equipment in the coming year. It is expected that the cost of disposal will be $ 36,460 . As of December 31, 2014, the equipment has a remaining useful life of 5 years.

Prepare the journal entry (if any) to record the impairment of the asset at December 31, 2014. (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

Cost $ 16,407,000 Accumulated depreciation to date 1,823,000 Expected future net cash flows 12,761,000 Fair value 8,750,400

Explanation / Answer

Costs           16,407,000.00 Accumulated depreciation to date             1,823,000.00 Value at end of 2014 after depi.e Carrying Amt           14,584,000.00 Impairment loss is the amount by which the carrying amount of an asset exceeds its recoverable amount Recoverable amount: the higher of an asset's fair value less costs of disposal* (sometimes called net selling price) and its value in use Value In use             12,761,000.00 Fair Value             8,750,400.00 Thus Higher is Value in Use i.e.12,761,000 Impairment loss = 14,584,000 - 12,761,000 Journal Entry Particulars Dr Amt Cr Amt a) Impairment loss on Equipment Dr             1,823,000.00 To Accumulated Impairment loss on Equipment     1,823,000.00

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