Question 4 (30 minutes) Elephant Corporation is a manufacturer of washing machine parts. Its capital assets include a specialized piece of equipment that is being used in the finishing stage of its manufacturing process. (Assume that the equipment can be considered a cash generating unit for exam purposes.) The equipment had a 10-year life, with no residual value. The equipment was purchased for$500,000 on January 1, 2018 and is being depreciated using the straight-line method. By December 31, 2019, the book (carrying) value was $400,000 (after depreciation expense had been recorded). However, at that time, Elephant became aware of new technology that would make the equipment obsolete within the next eight years. An appraisal puts the equipment's future undiscounted net cash flows at $390,000 and its fair value at $360,000. Disposal costs would be $20,000. Required: (Show all calculations to arrive at journal entry amounts.) Assuming Elephant is a private Canadian corporation, and assume it uses ASPE (which uses the 'cost recovery impairment model'). Its year end is December 31. a) Prepare the journal entry, if any, to record the impairment loss at December 31, 2019. If no entry, explain why there is no impairment. b) Prepare the journal entry to record 2020 depreciation. (Assume 8 year remaining life.) c) Assume that the equipment's fair value at the end of 2021 was $340,000. Record depreciation and any other entry required related to the equipment for 2021. d) Assume that Elephant uses IFRS, record the entry, if any, for the impairment loss in 2019. Assume that value in use'is $310,000. Question 4 (30 minutes) Elephant Corporation is a manufacturer of washing machine parts. Its capital assets include a specialized piece of equipment that is being used in the finishing stage of its manufacturing process. (Assume that the equipment can be considered a cash generating unit for exam purposes.) The equipment had a 10-year life, with no residual value. The equipment was purchased for$500,000 on January 1, 2018 and is being depreciated using the straight-line method. By December 31, 2019, the book (carrying) value was $400,000 (after depreciation expense had been recorded). However, at that time, Elephant became aware of new technology that would make the equipment obsolete within the next eight years. An appraisal puts the equipment's future undiscounted net cash flows at $390,000 and its fair value at $360,000. Disposal costs would be $20,000. Required: (Show all calculations to arrive at journal entry amounts.) Assuming Elephant is a private Canadian corporation, and assume it uses ASPE (which uses the 'cost recovery impairment model'). Its year end is December 31. a) Prepare the journal entry, if any, to record the impairment loss at December 31, 2019. If no entry, explain why there is no impairment. b) Prepare the journal entry to record 2020 depreciation. (Assume 8 year remaining life.) c) Assume that the equipment's fair value at the end of 2021 was $340,000. Record depreciation and any other entry required related to the equipment for 2021. d) Assume that Elephant uses IFRS, record the entry, if any, for the impairment loss in 2019. Assume that value in use'is $310,000