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Travis Corp. is reviewing equipment which it uses in its operations for possible impairment in value at the end of 2017. The following information about
Travis Corp. is reviewing equipment which it uses in its operations for possible impairment in value at the end of 2017. The following information about the equipment is determined:
Carrying amount $640,000
(cost of $1,000,000, less accumulated depreciation of $360,000)
Expected future net cash flows (undiscounted) $550,000
Fair market value $470,000
- A recent change in the manner in which the asset is used suggests a possible impairment. Which two of the three numbers presented above (carrying amount, expected future net cash flows, or fair market value) should be compared to apply the recoverability test?
- Assume the recoverability test you performed indicates an impairment has occurred. Which two of the three numbers presented above (carrying amount, expected future net cash flows, or fair market value) should be compared to calculate the amount of the impairment loss?
- What account is debited and what account is credited in a journal entry to record an impairment loss?
- Travis Corp. uses the straight-line method of depreciation, and the equipment has a remaining useful life of 4 years on December 31, 2017. Calculate the new carrying amount of the equipment after any impairment loss journal entry has been posted, and use this information to determine the amount of depreciation expense to be recorded in 2018.
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