Account Titles and Explanation Debit Credit Show List of Accounts Link to Text A

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Account Titles and Explanation

Debit

Credit

Show List of Accounts

Link to Text

Account Titles and Explanation

Debit

Credit

Show List of Accounts

Link to Text

Account Titles and Explanation

Debit

Credit

Presented below is information related to equipment owned by Swifty 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
Assume that Swifty will continue to use this asset in the future. As of December 31, 2017, the equipment has a remaining useful life of 5 years.

Explanation / Answer

1)Net realizable value =lower of fair value or net cash flow

        = 5760000 or 8400000

            = 5,760,000

Book value :10800000-1200000=9600000

since book value is more than net realizable value ,impairment loss = 9600000-5,760,000=3,840,000

1)Restoration of impairment loss is not permitted unless permanent.

Date Account debit credit 1 Impairment loss 3840000 Accumulated depreciation-equipment 3840000 [Being impairment loss recorded] 2 Depreciation expense 1,152,000 Accumulated depreciation-equipment 1,152,000 [being depreciation recorded Book value/useful life = 5760000/5=1152000]

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