Presented below is information related to equipment owned by Suarez Company at D
ID: 2487217 • Letter: P
Question
Presented below is information related to equipment owned by Suarez Company at December 31, 2014. Cost $ 14,382,000 Accumulated depreciation to date 1,598,000 Expected future net cash flows 11,186,000 Fair value 7,670,400 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 4 years.
a. 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.)
b. Prepare the journal entry to record depreciation expense for 2015. (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.)
c. The fair value of the equipment at December 31, 2015, is $8,149,800. 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.)
Explanation / Answer
1.
Cost 14,382,000
Less: Accumulated depreciation 1,598,000
Carrying amount 12,784,000
Less: Fair value 7,670,400
Loss on impairment 5,113,600
Loss on impairment A/C Dr 5,113,600
To Accumulated depreciation A/C 5,113,600
2. Net carrying amount 7,670,400
Useful life 4 years
Depreciation per year 1,917,600
Depreciation expense A/C Dr 1,917,600
To Accumulated depreciation A/C 1,917,600
3.Restoration of any impairment loss is not permitted.
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