Question

ons Presented below is information related to equipment owned by Swifty Company at December 31, 2017 Cost $9,630,000 Accumulated depreciation to date 1,070,000 Expected future net cash flows 7490,000 Fair value 5,136,000 Swifty intends to dispose of the equipment in the coming year. It is expected that the cost of disposal will be $21,400. As of December 31, 2017, the equipment has a remaining useful life of 4 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 eTextbook and Media let of Accnuntr

Answer 1

Pass journal entry to record the impairment of the asset as follows: | Account Titles and Explanation Date Debit Credit 31/12/2017 |Loss on impairment $3,445,400| $3,445,400 Accumulated depreciation-Equipment Working notes: $9,630,000 $1.070.000 $8,560,000 $5,136,000 $21,400 $3,445,400 Cost Less: Accumulated depreciation Carrying Amount Less Fair value Plus: Cost of disposal Loss on impairment Pass journal entry to record depreciation expense as follows: |Account Titles and Explanation Date Debit Credit 31/12/2018 No Entry Pass journal entry to record increase in fair value as follows: Account Titles and Explanation 31/12/2018 Accumulated depreciation-Equipment Recovery of loss on impairment Date Debit Credit $535,000 $535,000 Working notes: $5,671,000 $21,400 Fair value Less: Cost of disposal Carrying Amount Recovery of impairment loss $5,649,600 $5,114,600 9,630,000-1,070,000-3445400) $535,000