Use the same information from P12- 1 with three modifications:
• Chrispian Cookies, Inc. is an IFRS reporter.
• Similar baking equipment could be sold for $ 5,100,000.
• Chrispian estimates costs to sell the baking equipment are $ 5,000.
Future Period Cash Flow Projection
Year 1 ………………………………. $ 1,800,000
Year 2 ………………………………. 1,600,000
Year 3 ……………………………… 980,000
Year 4 ……………………………… 890,000
Year 5 ……………………………… 730,000
Total $ 6,000,000
Required
a. Conduct an impairment test for Chrispian’s baking equipment.
b. Prepare the journal entry to record any impairment loss indicated.
c. Compute the amount of the revised depreciation expense at the end of the next year. Assume that management now estimates that there will be no residual value at the end of the asset’s life.
d. Prepare any journal entry necessary if the estimated fair value less costs to sell at the end of the next year is $ 5,400,000 and its value in use is $ 4,900,000.