Question

Marilou, Inc. has equipment that may be impaired. Cost of equipment                              $800,000 A/D

Marilou, Inc. has equipment that may be impaired.

Cost of equipment                              $800,000

A/D to date                                         $200,000

Undiscounted future cash flows        $580,000

Fair value of equipment                      $525,000

Write the journal entry to record the impairment, if any.

Date

Account

Debit

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Business   Accounting   
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Answer #1
Cost of equipment 800000
Less Accumulated depreciation 200000
carrying value 600000
Undiscounted future cash flows 580000
Fair value of asset 525000
Recoverable value is higher of above 580000
Carrying value 600000
Less Recoverable value 580000
Impairment loss 20000
Journal entries
Loss on impairment 20000
               Equipment 20000
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