Question

Sheffield Company owns equipment that cost $1,053,000 and has accumulated depreciation of $444,600. The expected future net cash flows from the use of the asset are expected to be $585,000. The fair value of the equipment is $468,000. Prepare the journal entry, if any, to record the impairment loss. (

Answer 1

Step-by-step explanation:

The journal entry is shown below:

Loss on impairment A/c Dr $140,400

To Accumulated impairment loss A/c $140,400

(being the impairment loss is recorded)

The computation is shown below:

= Carrying value of the equipment - fair value of the equipment

where,

Carrying value of the equipment would be

= Cost of the equipment - accumulated depreciation

= $1,053,000 - $444,600

= $608,400

So, the loss would be

= $608,400 - $468,000

= $140,400