Question

23. Upbeat Corporation impairs individually insignificant properties on a group basis. Upbeat has the following groups of individually insignificant leases at 12/31/18. Group A Group B Group C Total costs $200,000 $300,000 $400,000 Total allowance for impairment 12/31/18 40,000 0 80,000 Expected average percentage of impairment 60% 70% 65% REQUIRED: Prepare journal entries to record impairment for each of the groups at 12/31/18

Answer 1

Allowance for impairment is already recognized impairment loss. In technical words, it is value of contra asset set up for provision for decline in value of assets.

Whenever, impairment loss is recognized, the respective accumulated impairment losses is credited,

	Group A	Group B	Group C
Total costs	200,000	300,000	400,000
Expected impairment (%)	60%	70%	65%
Expected impairment ($)	120,000	210,000	260,000
Less: impairment allowance	40,000	0	80,000
Impairment to be recognized this year	$ 80,000	$ 210,000	$ 180,000

The required journal entries are:

Date	Particulars	Debit ($)	Credit ($)
31/12/18	Impairment Loss- Group A	80,000
	Accumulated impairment loss		80,000
	(To record impairment loss)
	Impairment Loss- Group B	210,000
	Accumulated impairment loss		210,000
	(To record impairment loss)
	Impairment Loss- Group C	180,000
	Accumulated impairment loss		180,000
	(To record impairment loss)

Note that all these three entries can be clubbed as one entry also practically.

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