Account Titles and Explanation Debit Credit Account Titles and Explanation Debit

Question

Account Titles and Explanation

Debit

Credit

Account Titles and Explanation

Debit

Credit

Account Titles and Explanation

Debit

Credit

Presented below is information related to equipment owned by Flounder Company at December 31, 2017.
Cost $9,540,000 Accumulated depreciation to date 1,060,000 Expected future net cash flows 7,420,000 Fair value 5,088,000
Assume that Flounder will continue to use this asset in the future. As of December 31, 2017, the equipment has a remaining useful life of 5 years. 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.)
Date

Account Titles and Explanation

Debit

Credit

Dec. 31

Prepare the journal entry 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.)

Account Titles and Explanation

Debit

Credit

The fair value of the equipment at December 31, 2018, is $5,406,000. 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.)
Date

Account Titles and Explanation

Debit

Credit

Dec. 31

Explanation / Answer

Answer:

1

Prepare the journal entry (if any) to record the impairment of the asset at December 31, 2017.

Date

Account Titles and Explanation

Debit$

Credit $

31-Dec

Depreciation Expense.

3,392,000

Accumulated Depreciation-equipment

3,392,000

Note: The assent fails the recoverability test ($7,420,000 < $8,480,000)

Cost

9,540,000

Accumulated Depreciation

1,060,000

Carrying amount

8,480,000

Fair Value

5,088,000

Loss in impairment

3,392,000

______________________________________________________

2

Prepare the journal entry to record depreciation expense for 2018

Date

Account Titles and Explanation

Debit$

Credit $

31-Dec

Depreciation Expense.

1,017,600

Accumulated Depreciation-equipment

1,017,600

Working notes for the answer

New carrying amount

5,088,000

Decided by Useful life

5 years

Depreciation per year

1017600

__________________________________________

3

The fair value of the equipment at December 31, 2018, is $5,406,000. Prepare the journal entry (if any) necessary to record this increase in fair value.

Answer;

No entry necessary. Restoration of any impairment loss is not permitted

Date

Account Titles and Explanation

Debit$

Credit $

31-Dec

Depreciation Expense.

3,392,000

Accumulated Depreciation-equipment

3,392,000

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