Exercise 11-16 Presented below is information related to equipment owned by Buffalo Company at December 31, 2017. Cost $9,900,000 Accumulated depreciation to date 1,100,000 Expected future net cash flows 7,700,000 Fair value 5,280,000 Assume that Buffalo will continue to use this asset in the future. As of December 31, 2017, the equipment has a remaining useful life of 5 years.
DEC 31. Prepare the journal entry (if any) to record the impairment of the asset at December 31, 2017.
Prepare the journal entry to record depreciation expense for 2018.
DEC 31. The fair value of the equipment at December 31, 2018, is $5,610,000. Prepare the journal entry (if any) necessary to record this increase in fair value.
|Dec. 31||Loss on Impairment||3520000|
|Dec. 31||No entry||0|
|Less: Accumulated depreciation to date||1100000|
|Less: Fair value||-5280000|
|Loss on Impairment||3520000|
|Revised Carrying value||5280000|
|Remaining useful life (years)||5|
|Restoration of impairment loss is not permitted, for assets intended to be used in future|
|No entry is required for increase in fair value|
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