In a recent 10-K report, United Parcel Service states it “is the world’s largest package delivery company, a leader in the U.S. less-than-truckload industry, and a global leader in supply chain management.” The following note and data were reported:
Note 1—Summary of Accounting Policies
Impairment of Long-Lived Assets
. . . we review long-lived assets for impairment when circumstances indicate the carrying amount of an asset may not be recoverable based on the undiscounted future cash flows of the asset. . . .
Dollars in Millions
Cost of property and equipment (beginning of year) ....... $33,611
Cost of property and equipment (end of year) .......... 35,098
Capital expenditures during the year ............... 2,636
Accumulated depreciation (beginning of year) .......... 15,948
Accumulated depreciation (end of year) .............. 16,833
Depreciation expense during the year .............. 1,814
Cost of property and equipment sold during the year ....... 1,040
Accumulated depreciation on property sold ............ 929
Cash received on property sold .................. 147
Required:
1. Reconstruct the journal entry for the disposal of property and equipment during the year.
2. Compute the amount of property and equipment that United Parcel wrote off as impaired during the year.