Question
On January 1, 2015, Pearl Ltd. purchased equipment for $696,000. The equipment was assumed to have an 8-year useful life and no residual value, and
On January 1, 2015, Pearl Ltd. purchased equipment for $696,000. The equipment was assumed to have an 8-year useful life and no residual value, and was to be depreciated using the straight-line method. On January 1, 2017, Pearl's management became concerned that the equipment may have become obsolete. Management calculated that the undiscounted future net cash flows from the equipment was $500,250, the discounted future net cash flows was $443,700, and the current fair value of the equipment (after costs to sell) was $435,000.
a) Assuming that Pearl is a private Canadian company following ASPE, identify which model should be used to test for impairment.
b) Record the journal entry to record the impairment loss, if any.
c) Assuming that Pearl is a public Canadian company, identify which model should be used to test for impairment.
d) Record the journal entry to record the impairment loss, if any.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started