Alfalsal University Task Team: Jan 1, 2007, Faisal Company purchased equipment f

Question

Alfalsal University Task Team: Jan 1, 2007, Faisal Company purchased equipment for $ 900,000 with no residual value and estimated useful life of 9 years. The equipment was depreciated on a straight line basis. By Dec aisal Company was discussing whether this equipment should be tten off as a charge to current operations because of obsolescence (impairment). By the end of 2010, the equipment had management projected the present value of future net cash flows from the use be $300,000 be $280,000. The company intends to use the equipment in accumulated depreciation of $400.900. On the same date, the of the equipment to Value in use) while the fair value of the equipment less the cost to sell is estimate to the future. Requirements: 1. Was the equipment impaired on Dec 31, 2010? If yes, what is the impairment loss?

Explanation / Answer

Purchase Date 01.01.2007 Purchase Cost 900000 Useful Life 9 Depreciation PA 100000 At 31.12.2010: Year Elapsed 4 Depreciation 400000 Book Value at 2010 500000 Value in Use 300000 Fair Value 280000 Recoverable Value Maximum of Value in Use or Fair Value Recoverable Value 300000 or 280000 Recoverable Value 300000 Since the Value is less than Book Value of Asset, Asset is Impairments Book Value at 2010 500000 Recoverable Value 300000 Impairment Loss 200000 Book Value at 2011 400000 (500000-100000) Recoverable Value 270000 Impairment Loss 130000 Since the Impairment Loss has declined from the previous loss It has led to reversal of Impairment Loss (200000-130000) 70000

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.