Laser Pulse Communications Inc. spent ($ 90) million expanding its fiber optic communication network between Chicago and

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Laser Pulse Communications Inc. spent \(\$ 90\) million expanding its fiber optic communication network between Chicago and Los Angeles during 2006. The fiber optic network was assumed to have a 10 -year life, with a \(\$ 10\) million salvage value, when it was put into service on January 1, 2007. The network is depreciated using the straight-line method. At the end of 2008, the expected traffic volume on the fiber optic network was only \(60 \%\) of what was originally expected. The reduced traffic volume caused the fair market value of the asset to be estimated at \(\$ 50\) million on December 31, 2008. The loss is not expected to be recoverable.

a. Determine the book value of the network on December 31, 2008, prior to the impairment adjustment.

b. Provide the journal entry to record the fixed asset impairment on December 31, 2008.

c. Provide the balance sheet disclosure for fixed assets on December 31, 2008.

obj. 5

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Financial Accounting

ISBN: 9780324380675

10th Edition

Authors: Carl S. Warren, James M. Reeve, Jonathan Duchac

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