Refer to problem P10-31. Assume that Super Computers Inc. is a private company that elects to report

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Refer to problem P10-31. Assume that Super Computers Inc. is a private company that elects to report its financial results in accordance with ASPE. Provide the required information above.

Data from P10-31

Super Computers Inc. (SCI) is a publicly accountable enterprise that manufactures computer microchips. It is conducting various impairment tests in concert with the preparation of its financial statements for the year ended December 31, 2016. Management is concerned that due to the recent introduction of more mechanized production equipment, it is possible that the value of one of SCI’s machines is impaired. SCI uses the cost model to account for the machine and is depreciating it on a straight-line basis over four years.
Other relevant information follows:

Original cost ........................................................................ $2,400,000
Accumulated depreciation ................................................     600,000
Estimated residual value ...................................................                  0
Fair value – December 31, 2016 .......................................   1,400,000
Costs to sell .........................................................................          50,000
Incremental cash flow 2017 ..............................................      550,000
Incremental cash flow 2018 ..............................................      550,000
Incremental cash flow 2019 ..............................................      550,000
Incremental cash flow 2020 and later .............................                  0
Risk-adjusted cost of capital ...............................................               9%


Required:
a. Determine whether the asset is impaired, and if so prepare the journal entry.
b. Management determined that the fair value less costs to sell off the machine as at December 31, 2017, was $975,000. Prepare the required journal entry, if any.

Financial Statements
Financial statements are the standardized formats to present the financial information related to a business or an organization for its users. Financial statements contain the historical information as well as current period’s financial...
Cost Of Capital
Cost of capital refers to the opportunity cost of making a specific investment . Cost of capital (COC) is the rate of return that a firm must earn on its project investments to maintain its market value and attract funds. COC is the required rate of...
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Intermediate Accounting

ISBN: 9787300071374

3rd Edition Vol. 1

Authors: Kin Lo, George Fisher

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