Question

4. Presented below is information related to equipment owned by Wambach

         Corporation at December 31, 2019.

                        Cost                                                     $2,700,000

                        Carrying amount                                   2,400,000

                        Expected future net cash flows             2,100,000

                        Fair value                                              1,400,000

Assume Wambach will continue to use this asset in the future. As of December 31, 2019, the equipment has a remaining useful life of 5 years.

Instructions:

Companies must use a recoverability test to determine whether an impairment has occurred. Based on the information above, Wambach has an impairment on the equipment. Show the calculations to prove this.

Compute the loss on impairment that Wambach needs to record.

Record the journal entry for the impairment.

Date		Debit	Credit

Answer 1