The information that follows relates to equipment owned by Waterway Limited at December 31, 2017: Cost $9,540,000
Question:
The information that follows relates to equipment owned by Waterway Limited at December 31, 2017:
Cost | $9,540,000 | |
Accumulated depreciation to date | 1,060,000 | |
Expected future net cash flows (undiscounted) | 7,420,000 | |
Expected future net cash flows (discounted, value in use) | 6,731,000 | |
Fair value | 6,572,000 | |
Costs to sell (costs of disposal) | 53,000 |
At December 31, 2017, Waterway 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 $47,500.
REQUIRED:
1 a) Prepare the journal entry at December 31, 2017, to record asset impairment, if any
b) Prepare the journal entry to record depreciation expense for 2018.
c) Assume that the asset was not sold by December 31, 2018. The equipment’s fair value (and recoverable amount) on this date is $6.890 million. Prepare the journal entry, if any, to record the increase in fair value. It is expected that the costs of disposal will total $53,000
2) Repeat the requirements in (a) above assuming that Waterway is a public company that follows IFRS, and that the asset meets all criteria for classification as an asset held for sale.
Intermediate Accounting
ISBN: 978-1118742976
16th edition
Authors: Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield