Presented below is information related to equipment owned by Pronghorn Company a
ID: 2512124 • Letter: P
Question
Presented below is information related to equipment owned by Pronghorn Company at December 31, 2017.
Pronghorn intends to dispose of the equipment in the coming year. It is expected that the cost of disposal will be $20,200. As of December 31, 2017, the equipment has a remaining useful life of 4 years.
Prepare the journal entry (if any) to record the impairment of the asset at December 31, 2017. (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.)
Prepare the journal entry (if any) to record depreciation expense for 2018. (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.
The asset was not sold by December 31, 2018. The fair value of the equipment on that date is $5,353,000. Prepare the journal entry (if any) necessary to record this increase in fair value. It is expected that the cost of disposal is still $20,200. (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.)
Cost 9090000 Accumulated depreciation to date 1010000 expected future net cash flow 7070000 fair value 4848000Explanation / Answer
In the books of Pronghorn Company:
* Carrying value of the asset : $ 9,090,000 - $ 1,010,000 = $ 8,080,000
Carrying value less fair value = $ 8,080,000 - $ 4,848,000 = $ 3,232,000
Loss on impairment = $ 3,232,000 + $ 20,200 = $ 3,252,200.
Date Account Title Debit Credit $ $ Dec 31, 2017 Loss on Impairment * 3,252,200 Accumulated Depreciation 3,252,200 To record impairment loss Dec 31, 2018 Not necessary to prepare entry for depreciation expense 0 0 Dec 31, 2018 Accumulated Depreciation : Equipment $ (5,353,000 - 4,848,000) 505,000 Recovery of Loss on Impairment 505,000 To record increase in fair valueRelated Questions
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