Question

Information related to trucks owned by Macy Corp. at December 31, 2019, is presented below.

Cost $7,000,000

Accumulated depreciation to date 1,500,000

Value-in-use 5,000,000

Fair value less cost of disposal 4,400,000

Required:

B1. Determine any impairment loss for the trucks on December 31, 2019.

B2. Prepare the journal entry to record the impairment loss.

Answer 1

	Cost of asset	$7,000,000
	Accumulated depreciation	$1,500,000
	Book value	$5,500,000
	Recoverable amount:	$5,000,000
	Higher of :
	Value of in use	$5,000,000
	Fair value less cost of disposal	$4,400,000
B1	Impairment loss	$500,000	(5500000-5000000)
B2	Particulars	Debit	Credit
	Impairment loss	$500,000
	Accumulated depreciation		$500,000
	(impairment loss incurred)