Brief Exercise 11-8 Bramble Company owns equipment that cost $909,000 and has ac

Question

Brief Exercise 11-8

Bramble Company owns equipment that cost $909,000 and has accumulated depreciation of $383,800. The expected future net cash flows from the use of the asset are expected to be $505,000. The fair value of the equipment is $404,000.

Prepare the journal entry, if any, to record the impairment loss. (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.)

Explanation / Answer

Solution:

Recoverable amount of equipment= Higher of value in use and fair value less cost of disposal = $505,000

Cost of Asset = $909,000

Accumulated depreciation = $383,800

Carrying amount = $909,000 - $383,800 = $525,200

Recoverable amount = $505,000

Loss on impairment = $525,200 - $505,000 = $20,200

Journal Entries - Bramble Company Event Particulars Debit Credit 1 Impairment loss Dr $20,200.00              To Accumulated depreciation - Equipment $20,200.00 (To record impairment loss on equipment)

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