CALCULATOR PRINTER VERSION 1 BACK NEXT SHOW LIST OF ACCOUNTS LINK TO TEXT Prepar
ID: 2532676 • Letter: C
Question
CALCULATOR PRINTER VERSION 1 BACK NEXT SHOW LIST OF ACCOUNTS LINK TO TEXT Prepare the journal entry (if any) to record the impairment at December 31, 2017 and for the equipment at December 31, 2018, assuming that Flint intends to dispose of the equipment and that it has not been disposed of as of December 31, 2018. (If no entry is required, select "No entry " for the account titles and enter o for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.) Date Account Titles and Explanation Debit Credit 12/31/17 12/31/18 Click if you would like to show Work for this question: Open Show Work SHOW LIST OF ACCOUNTS LINK TO TEXTExplanation / Answer
Problem 11-9:
Date
Account titles and explanations
Debit ($)
Credit ($)
31-12-17
Loss on impairment
1320000
Equipment
1320000
(Being impairment loss recognized)
Profit and loss account
1320000
Loss on impairment
1320000
(Being impairment loss recognized)
Working note:
Purchase value of the equipment in January, 2016
11000000
Useful life
8 years
Annual depreciation as per SLM (11000000 / 8)
1375000
Depreciation for two years, i.e. till 31/12/2017
Annual depreciation x 2
2750000
Book Value of equipment as on 31/12/2017
Purchase price
11000000
Less: Accumulated and current year depreciation
2750000
Book value of the equipment
8250000
Estimated future net cash flows on the equipment
6930000
Fair value of the equipment
6160000
Thus, value of the equipment to be taken on 31/12/2017
6930000
Book value of the equipment
8250000
Less: Actual value as on 31/12/2017
6930000
Loss on impairment
1320000
Note: Higher of fair value and estimate future cash flow of the equipment has been considered to determine the loss on impairment.
Date
Account titles and explanations
Debit ($)
Credit ($)
31-12-18
Equipment
1292500
Gain on impairment
1292500
(Being the gain on impairment recorded)
Gain on impairment
1292500
Revaluation reserve
1292500
(Being the gain on impairment recorded)
Working note:
Value of the asset as on 31/12/2017
6930000
Useful life
4 years
Annual depreciation (6930000 / 4)
1732500
Book value of the equipment as on 31/12/2018:
Value of the asset as on 31/12/2017
6930000
Less: Depreciation for 2018
1732500
Book value of the equipment as on 31/12/2018:
5197500
Fair value of the equipment as on 31/12/2018
6490000
Impairment gain (6490000 - 5197500)
1292500
Date
Account titles and explanations
Debit ($)
Credit ($)
31-12-17
Loss on impairment
1320000
Equipment
1320000
(Being impairment loss recognized)
Profit and loss account
1320000
Loss on impairment
1320000
(Being impairment loss recognized)
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