Recording a Tangible Asset Impairment A booking has d cost of $750,000 and accum

Question

Recording a Tangible Asset Impairment A booking has d cost of $750,000 and accumulated depreciation of $125,000. The fair value of the building is estimated to be $300,000. The bullfrog is expected to inflows of $20,000 per year for the next 30 years Determine whether the bridge is impared. If it is impaired, make the journal entry necessary to record the impairment loss. If no entry is reouired, select 'No entry retired' and leave the amount boxes Wank If on amount box does not require an entry, leave it blank.

Explanation / Answer

The building will be impaired if its recoverable amount is less than its carrying amount.

Carrying amount=Cost of the building-Accumulated depreciation

                           $(750,000-125,000)

                              =$625,000

Recoverable amount=Higher of net selling price or value in use

                                  =Higher of 300,000 or $(20,000*30)

                                 =$600,000

Hence the building is impaired by $625,000-600,000

                                         =$25,000

Journal

i)Impairment Loss a/c    ...Dr $25,000

To Building a/c                            $25,000

ii)Profit & Loss a/c     .....Dr $25,000

To Impairment Loss a/c           $25,000

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