Presented below is information related to non-current assets owned by Marley Com

Question

Presented below is information related to non-current assets owned by Marley Company at December 31, 2015.

                                                                                              Equipment        Copyright

                        Cost                                                               $7 000 000        $2 700 000

                        Accumulated depreciation to date                 1 500 000

                        Carrying amount                                                         -           2 350 000

                        Value-in-use                                                  5 000 000

                        Fair value less cost of sell                              4 400 000

                        Recoverable amount                                                  -           1 500 000

Assume that Marley will continue to use both assets in the future. As of December 31, 2015, the equipment had a remaining useful of 4 years and the copyrights had a remaining useful life of 5 years. Please show all workings and attach in order for me to copy and paste.Please and thank yiu.

Required:

(a)       Prepare the journal entries (if any) to record the impairment of the assets at December 31, 2015.                                                                        (16 marks)

(b)       Prepare the journal entries to record depreciation and amortization expense for 2016.                                                                                                       (14 marks)

(c)       The recoverable amounts at December 31, 2016, of the equipment is $5 750 000 and the copyrights is $1 600 000. Prepare the journal entries (if any) necessary to account for impairment.                                                                             (16 marks)

(d)       What is the amount for depreciation and amortization for 2017?          (6 marks)

Explanation / Answer

a)

Impairment loss of Equipment as on December 31, 2015 = 7000000 - 1500000 - 4400000 = 1100000

Journal Entry:

Impairment loss DR 1100000

EquipmentCR 1100000

Impairment loss of Copyright as on December 31, 2015 = 2350000 -1500000 = 850000

Journal Entry:

Impairment loss DR 850000

Copt right CR 850000

b)

Depreciation on Equipment = 4400000/4 = 1100000

Amortisation on Copyright = 1500000/5 = 300000

Journal Entry for depreciation:

Depreciation DR 1100000

Accumulated Depreciation CR 1100000

Journal Entry for amortisation:

Amortisation DR 300000

Copyright CR 300000

c)

Book value of eqipment as on December 31, 2016 = 4400000 - 1100000 =3300000

Impairment loss of Equipment as on December 31, 2016 = 0 (as recoverable amount is higher than book value)

Journal Entry: NIL

Carrying amount of copyright as on December 31, 2016 = 1500000 - 300000 = 1200000

Impairment loss of Copyright as on December 31, 2016 = 0 (as recoverable amount is higher than carrying amount)

Journal Entry: NIL

d)

Depreciation on Equipment = 4400000/4 = 1100000

Amortisation on Copyright = 1500000/5 = 300000

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