Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Question 11 The management of Skysong Inc., a small private company that uses the cost recovery impairment model, was discussing whether certain equipment should be

Question 11

The management of Skysong Inc., a small private company that uses the cost recovery impairment model, was discussing whether certain equipment should be written down as a charge to current operations because of obsolescence. The assets had a cost of $900,000, and depreciation of $350,000 had been taken to December 31, 2017. On December 31, 2017, management projected the undiscounted future net cash flows from this equipment to be $340,000, and its fair value to be $200,000. The company intends to use this equipment in the future.

Prepare the journal entry, if any, to record the impairment at December 31, 2017. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

Date

Account Titles and Explanation

Debit

Credit

December 31, 2017

SHOW LIST OF ACCOUNTS

At December 31, 2018, the equipments fair value increased to $280,000. Prepare the journal entry, if any, to record this increase in fair value. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

Date

Account Titles and Explanation

Debit

Credit

December 31, 2018

SHOW LIST OF ACCOUNTS

Assume instead that as of December 31, 2017, the equipment was expected to have undiscounted future net cash flows of $600,000, and that its fair value was estimated to be $460,000. Prepare the journal entry to record the impairment at December 31, 2017, if any. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

Date

Account Titles and Explanation

Debit

Credit

December 31, 2017

SHOW LIST OF ACCOUNTS

Assume instead that as of December 31, 2017, the equipment was expected to have undiscounted future net cash flows of $45,000 per year for each of the next 10 years, and that there is no active market for the equipment. Luis Inc. uses a 10% discount rate in its cash flow estimates. Prepare the journal entry to record impairment at December 31, 2017, if any. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Round factor values to 5 decimal places, e.g. 1.25124 and final answers to 0 decimal places, e.g. 1,251.) Click here to view the factor table.

Date

Account Titles and Explanation

Debit

Credit

December 31, 2017

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Advanced Principles Of Auditing

Authors: Hugo Romero

1st Edition

1632409372, 978-1632409379

More Books

Students also viewed these Accounting questions

Question

9. What is the most important factor in a strategic alliance?

Answered: 1 week ago

Question

administering an adversive consequence is referred to as

Answered: 1 week ago

Question

what is a peer Group? Importance?

Answered: 1 week ago

Question

The company openly shares plans and information with employees.

Answered: 1 week ago