Question 6 (10 marks)

Wizards Corporation's balance sheet includes the following asset:

Equipment....................................................................................... $110,000

Less: Accumulated depreciation..................................................... (20,000)

Carrying amount (book value)........................................................ $90,000

After performing its annual review for impairment, Wizards obtains the following data:

Asset value in use............................................................................ $64,000

Fair value less selling costs............................................................. $67,000

Instructions

Assuming Wizards uses the rational entity impairment model:

a. Determine the recoverable amount and explain the rule succinctly. (4 marks)

b. Calculate the impairment loss. (4 marks)

c. Prepare the entry to record the impairment loss. (2 marks)

Please answer all parts.