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16 July, 07:04

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

Cost $4,680,000

Accumulated depreciation to date 468,000

Expected future net cash flows 3,120,000

Fair value 2,184,000

Assume that Cullumber will continue to use this asset in the future. As of December 31, 2017, the equipment has a remaining useful life of 4 years.

(a) Prepare the journal entry (if any) to record the impairment of the asset at December 31, 2017.

(b) Prepare the journal entry to record depreciation expense for 2018.

(c) The fair value of the equipment at December 31, 2018, is $5, 100,000. Prepare the journal entry (if any) necessary to record this increase in fair value.

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Answers (1)
  1. 16 July, 07:26
    0
    Answer and Explanation:

    Before recording the journal entries first we need to find out the depreciation expense which is shown below:

    Cost $4,680,000

    Less: Accumulated Deprecation-equipment $468,000

    Net Value $4,212,000

    Less: Fair value $2,184,000

    Loss on Impairment $2,028,000

    And,

    Fair value $2,184,000

    Divide by Life 4 years

    So, Depreciation Expenses $546,000

    Now the journal entry is

    1 Loss on Impairment $2,028,000

    To Accumulated Deprecation - equipment $2,028,000

    (Being the loss on impairment is recorded)

    2 Depreciation Expenses $546,000

    To Accumulated Deprecation - equipment $546,000

    (Being the depreciation expense is recorded)

    3. No journal entry is required
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Home » Business » Presented below is information related to equipment owned by Cullumber Company at December 31, 2017. Cost $4,680,000 Accumulated depreciation to date 468,000 Expected future net cash flows 3,120,000 Fair value 2,184,000 Assume that Cullumber will
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