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Exercise 11-17 (A) Prepare the journal entry (if any) to record the impairment o

ID: 2524960 • Letter: E

Question

Exercise 11-17

(A) 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.)

(B) 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.)

(C) The asset was not sold by December 31, 2018. The fair value of the equipment on that date is $6,360,000. Prepare the journal entry (if any) necessary to record this increase in fair value. It is expected that the cost of disposal is still $24,000. (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.)

List of Accounts

Accumulated Depreciation-Building
Accumulated Depreciation-Equipment
Accumulated Depreciation-Machinery
Accumulated Depreciation-Plant Assets
Accumulated Depreciation-Trucks
Buildings
Cash
Coal Mine
Depreciation Expense
Equipment
Gain on Disposal of Machinery
Inventory
Loss on Disposal of Plant Assets
Loss on Impairment
Machinery
Maintenance and Repairs Expense
No Entry
Paid-in Capital in Excess of Par - Common Stock
Plant Assets
Recovery of Loss from Impairment
Retained Earnings
Trucks

Exercise 11-17

Presented below is information related to equipment owned by Ivanhoe Company at December 31, 2017.
Cost $10,800,000 Accumulated depreciation to date 1,200,000 Expected future net cash flows 8,400,000 Fair value 5,760,000
Ivanhoe intends to dispose of the equipment in the coming year. It is expected that the cost of disposal will be $24,000. As of December 31, 2017, the equipment has a remaining useful life of 5 years.

Explanation / Answer

(A) Prepare the journal entry (if any) to record the impairment of the asset at December 31, 2017

Date

Account Titles and Explanation

Debit

Credit

Dec. 31

Loss on impairment

38,64,000

      Accumulated depreciation-Equipment

38,64,000

Impairment Loss = [ ($1,08,00,000 - $12,00,000) - $57,60,000 ] + $24,000

                             = $38,64,000

(B) Prepare the journal entry (if any) to record depreciation expense for 2018

No Entry equired

(C) The asset was not sold by December 31, 2018. The fair value of the equipment on that date is $6,360,000. Prepare the journal entry (if any) necessary to record this increase in fair value. It is expected that the cost of disposal is still $24,000.

Date

Account Titles and Explanation

Debit

Credit

Dec. 31

Accumulated depreciation-Equipment

6,00,000

         Recovery of loss on Impairment

6,00,000

$6,00,000 = $63,60,000 - $57,60,000

Date

Account Titles and Explanation

Debit

Credit

Dec. 31

Loss on impairment

38,64,000

      Accumulated depreciation-Equipment

38,64,000