On August 1, 2020, Halifax Corporation purchased a truck with a cost of $57,000 and paid an additional $2,800 in freight to ship the truck to Halifax Corporation's warehouse.

 

The truck has an estimated useful life of 5 years and an estimated residual value of $3,300.

 

Halifax Corporation uses the straight-line method of depreciation, and records depreciation to the nearest whole month.

 

At the end of the 2021 year, Halifax Corporation recorded depreciation on the truck, and assessed the truck for impairment.  This assessment revealed the following information:

 

Value in use of truck on December 31, 2021	$51,630
Undiscounted future cash flows of truck on December 31, 2021	71,500
Fair value of truck on December 31, 2021	52,100
Costs if Halifax Corporation disposes of truck	250

 

Halifax Corporation follows IFRS, and has a year end of December 31.

 

Required:

 journal entries to record the depreciation of the truck from its date of acquisition to the end of the 2021 year. (4 marks)

1. Determine whether the asset is impaired on December 31, 2021.  If so, by how much is the asset impaired? Show all applicable calculations.  (4 marks)
2. Assuming that the asset is impaired, what account(s) would you debit, and what account(s) would you credit to record the impairment charge?

Answer rating: 100% (QA)

1 Journal entries to record the depreciation of the truck from its date of acquisition to the end of the 2021 year To record depreciation expense for ... View the full answer