Use the same information from E12- 3 but now assume that Derrick’s Domino Manufacturing Company is an IFRS reporter.
In E12-3
Description Cutting Machine
Cost …………………………………………………………………….. $3,200,000 Accumulated depreciation ( up to the date of the impairment test)……. $ 1,280,000
Total estimated future cash flows………………………………………. $1,225,000
Total discounted future cash flows $ 1,060,000 Estimated fair value….. $ 1,050,000
Costs to sell …………………………………………………………….. $ 4,000
Remaining useful life from the impairment date……………………….. 6 years
Required
a. Prepare the journal entry required to record the impairment loss.
b. Assuming that Derrick’s uses the straight- line method with no residual value, prepare the journal entry to record the revised depreciation expense for the first year immediately following the impairment.
c. Assume that two years following the impairment write- down, the fair value ( less the costs to sell) and value in use of the asset falls to $ 725,000. Prepare any journal entry necessary to reflect the change in fair value.