Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

The information that follows relates to equipment owned by Buffalo Limited at December 31, 2020: Cost$8,190,000 Accumulated depreciation to date910,000 Expected future net cash flows

The information that follows relates to equipment owned by Buffalo Limited at December 31, 2020:

Cost$8,190,000

Accumulated depreciation to date910,000

Expected future net cash flows (undiscounted)6,370,000

Expected future net cash flows (discounted, value in use)5,778,500

Fair value5,642,000

Costs to sell (costs of disposal)45,500

At December 31, 2020, Buffalo discontinues use of the equipment and intends to dispose of it in the coming year by selling it to a competitor. It is expected that the costs of disposal will total $45,500.

Assume that Buffalo is a private company that follows ASPE.

1.

Prepare the journal entry at December 31, 2020, to record asset impairment, if any.

2.

Prepare the journal entry to record depreciation expense for 2021.

3.

Assume that the asset was not sold by December 31, 2021. The equipment's fair value (and recoverable amount) on this date is $5.92 million. Prepare the journal entry, if any, to record the increase in fair value. It is expected that the costs of disposal will total $45,500.

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

Corporate Finance

Authors: Stephen Ross, Randolph Westerfield, Jeffrey Jaffe, Bradford Jordan

12th edition

1259918947, 1260091908, 978-1259918940

More Books

Students also viewed these Accounting questions

Question

Tell me about the other language(s) you speak.

Answered: 1 week ago

Question

1. Build trust and share information with others.

Answered: 1 week ago