Question

Exercise 11-16

Presented below is information related to equipment owned by Shamrock Company at December 31, 2017.

Cost		$10,260,000
Accumulated depreciation to date		1,140,000
Expected future net cash flows		7,980,000
Fair value		5,472,000

Assume that Shamrock will continue to use this asset in the future. As of December 31, 2017, the equipment has a remaining useful life of 5 years.

A. 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

B. The fair value of the equipment at December 31, 2018, is $5,814,000. Prepare the journal entry (if any) necessary to record this increase in fair value. (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

Answer 1

A)31 dec Impariment DR $3,648,000

To Asset Cr $3,648,000

B)Asset Dr $ 342,000

To Impairment Cr $ 342,000

asset is recorded at lower of historial cost or fair market value

if the fair market value increaes then impairment account can be reversed only upto the extent we have debited it

working

particular s	amount
cost	$1,02,60,000.00
accumulated dep	$11,40,000.00
	$91,20,000.00
fair value	$54,72,000.00
impariment	$36,48,000.00
book value	$18,24,000.00
fair value	$58,14,000.00
difif	$3,42,000.00

I hope my workings are enough to undertstand

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