Exercise 11-17 (A) Prepare the journal entry (if any) to record the impairment o
ID: 2524960 • Letter: E
Question
Exercise 11-17
(A) Prepare the journal entry (if any) to record the impairment of the asset at December 31, 2017. (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 (if any) to record depreciation expense for 2018. (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 asset was not sold by December 31, 2018. The fair value of the equipment on that date is $6,360,000. Prepare the journal entry (if any) necessary to record this increase in fair value. It is expected that the cost of disposal is still $24,000. (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.)
List of Accounts
Accumulated Depreciation-Building
Accumulated Depreciation-Equipment
Accumulated Depreciation-Machinery
Accumulated Depreciation-Plant Assets
Accumulated Depreciation-Trucks
Buildings
Cash
Coal Mine
Depreciation Expense
Equipment
Gain on Disposal of Machinery
Inventory
Loss on Disposal of Plant Assets
Loss on Impairment
Machinery
Maintenance and Repairs Expense
No Entry
Paid-in Capital in Excess of Par - Common Stock
Plant Assets
Recovery of Loss from Impairment
Retained Earnings
Trucks
Exercise 11-17
Presented below is information related to equipment owned by Ivanhoe Company at December 31, 2017.Cost $10,800,000 Accumulated depreciation to date 1,200,000 Expected future net cash flows 8,400,000 Fair value 5,760,000
Ivanhoe intends to dispose of the equipment in the coming year. It is expected that the cost of disposal will be $24,000. As of December 31, 2017, the equipment has a remaining useful life of 5 years.
Explanation / Answer
(A) Prepare the journal entry (if any) to record the impairment of the asset at December 31, 2017
Date
Account Titles and Explanation
Debit
Credit
Dec. 31
Loss on impairment
38,64,000
Accumulated depreciation-Equipment
38,64,000
Impairment Loss = [ ($1,08,00,000 - $12,00,000) - $57,60,000 ] + $24,000
= $38,64,000
(B) Prepare the journal entry (if any) to record depreciation expense for 2018
No Entry equired
(C) The asset was not sold by December 31, 2018. The fair value of the equipment on that date is $6,360,000. Prepare the journal entry (if any) necessary to record this increase in fair value. It is expected that the cost of disposal is still $24,000.
Date
Account Titles and Explanation
Debit
Credit
Dec. 31
Accumulated depreciation-Equipment
6,00,000
Recovery of loss on Impairment
6,00,000
$6,00,000 = $63,60,000 - $57,60,000
Date
Account Titles and Explanation
Debit
Credit
Dec. 31
Loss on impairment
38,64,000
Accumulated depreciation-Equipment
38,64,000
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