On January 1, 2015, Pearl Ltd. purchased equipment for $696,000. The equipment was assumed to have an 8-year useful life and no residual value, and was to be depreciated using the straight-line method. On January 1, 2017, Pearl's management became concerned that the equipment may have become obsolete. Management calculated that the undiscounted future net cash flows from the equipment was $500,250, the discounted future net cash flows was $443,700, and the current fair value of the equipment (after costs to sell) was $435,000.

a) Assuming that Pearl is a private Canadian company following ASPE, identify which model should be used to test for impairment.

b) Record the journal entry to record the impairment loss, if any.

c) Assuming that Pearl is a public Canadian company, identify which model should be used to test for impairment.

d) Record the journal entry to record the impairment loss, if any.

Answer rating: 100% (QA)

a ASPE uses a twostep impairment testing process which is as follows Compare the carrying value of the asset to the expected undiscounted cash flows I... View the full answer