Danier Leather Inc. is a Canadian company that designs, manufactures, and market
ID: 2777810 • Letter: D
Question
Danier Leather Inc. is a Canadian company that designs, manufactures, and markets quality leather and suede products for both women and men. The following note and information were reported in a recent annual report:
Property and equipment and computer software with finite lives are tested for impairment when events or changes in circumstances indicate that the carrying amount may not be recoverable at the financial position date. For purposes of measuring recoverable amounts, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units or CGUs), which is at the individual store level for the Company. The recoverable amount is the greater of an asset’s fair value less costs to sell and value in use (being the present value of the expected future cash flows of the relevant asset or CGU). An impairment loss is recognized for the amount by which the asset’s carrying amount exceeds its recoverable amount. The Company evaluates impairment losses for potential reversals when events or circumstances warrant such consideration.
Reconstruct the journal entry for the disposal of equipment during the year. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in thousands of dollars.)
Danier Leather Inc. is a Canadian company that designs, manufactures, and markets quality leather and suede products for both women and men. The following note and information were reported in a recent annual report:
Explanation / Answer
Answer:
The equipment sold has been fully depreciated but still it has recoverable value of $ 65, however, on the basis of prudent the Company is not wrong by accounting for impairement of full value of the equipment sold and the balancing figure of $ 66 in Accumulated depreciation and impairment losses account shall be treated as profit on sale of equipment. Since, there is no additional loss on sale of equipment; hence there is no need of any additional impairment of equipment.
Hence, No journal entry is required.
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