Quick Company acquired a piece of equipment in Year 1 at a cost of $100,000 The equipment has a 10 year estimated life, zero salvage value , and is depreciated on a straight line basis Technological innovations take place in the industry in which the company operates in Year 4 Quick gathers the fol...

a IAS 36 requires companies to assess annually whether there are any indicators that an asset is impaired If so then an impairment loss calculation mu ...

Quick Company acquired a piece of equipment in Year 1 at a cost of $100,000. The equipment

Question:

Quick Company acquired a piece of equipment in Year 1 at a cost of $100,000. The equipment has a 10-year estimated life, zero , and is depreciated on a straight-line basis. Technological innovations take place in the industry in which the company operates in Year 4. Quick gathers the following information for this piece of equipment at the end of Year 4:
Expected future un from continued use ………………. $59,000
Present value of expected future cash flows from continued use …………….. 51,000
Net selling price in the used equipment market ………………………………. 50,000
At the end of Year 6, it is discovered that the technological innovations related to this equipment are not as effective as first expected. Quick estimates the following for this piece of equipment at the end of Year 6:
Expected future un from continued use ……………. $50,000
Present value of expected future cash flows from continued use …………. 44,000
Net selling price in the used equipment market ……………………………........ 42,000

Required:
a. Discuss whether Quick Company must conduct an impairment test on this piece of equipment at December 31, Year 4.
b. Determine the amount at which Quick Company should carry this piece of equipment on its at December 31, Year 4; December 31, Year 5; and December 31, Year 6. Prepare any related journal entries. Discounted Cash Flows
What is Discounted Cash Flows? Discounted Cash Flows is a valuation technique used by investors and financial experts for the purpose of interpreting the performance of an underlying assets or investment. It uses a discount rate that is most... Salvage Value
Salvage value is the estimated book value of an asset after depreciation is complete, based on what a company expects to receive in exchange for the asset at the end of its useful life. As such, an asset’s estimated salvage value is an important... Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...