Question

Prepare journal entries for each of the following transactions entered into by the City of Loveland.

Due to technological developments, the city determined that the service capacity of some of the technology equipment used by general government had been impaired. The calculated impairment loss due to technology obsolescence was $1,156,000.
a. Debit: Impairment Loss $1,156,000; Credit: Accumulated Depreciation $1,156,000

b. Debit: General Government Expense $1,156,000; Credit: Impairment Loss $1,156,000

c. Debit: Accumulated Depreciation $1,156,000; Credit: General Government Expense $1,156,000

d. Debit: Accumulated Depreciation $1,156,000; Credit: Technology Equipment $1,156,000

Answer 1

The proper accounting treatment for recording an impairment loss involves debiting the impairment loss account and crediting the asset account, not accumulated depreciation.

Step-by-step explanation:

The correct journal entry for recording an impairment loss due to technology obsolescence in a governmental accounting context should reflect the decrease in the asset's service potential. The entry would debit the expense account and credit the specific asset being impaired, which, in this case, involves technology equipment. Accumulated depreciation is not directly affected by the recording of an impairment loss.

Therefore, the correct journal entry to record the impairment of technology equipment is:

• Debit: Impairment Loss $1,156,000
• Credit: Technology Equipment $1,156,000

This entry directly reduces the carrying amount of the technology equipment and records the impairment loss in the current period's expenses, allowing for an accurate representation of the city's financial position.