Business, 06.06.2020 00:00 baeethtsadia

Blue Company uses special strapping equipment in its packaging business. The equipment was purchased in January 2019 for $12,200,000 and had an estimated useful life of 8 years with no salvage value. At December 31, 2020, new technology was introduced that would accelerate the obsolescence of Blue’s equipment. Blue’s controller estimates that expected future net cash flows on the equipment will be $7,686,000 and that the fair value of the equipment is $6,832,000. Blue intends to continue using the equipment, but it is estimated that the remaining useful life is 4 years. Blue uses straight-line depreciation. (a) Prepare the journal entry (if any) to record the impairment at December 31, 2020.

(b) Prepare the journal entry for the equipment at December 31, 2021.

Answers: 1

Show answers

Answers

Answer from: scott5315

Journal Entry - Impairment

Debit : Impairment Loss, $854,000

Credit: Accumulated Impairment Loss, $854,000

Journal entry - Depreciation

Debit : Depreciation expense, $2,135,000

Credit : Accumulated Depreciation, $2,135,000

Explanation:

Impairment loss is the excess of the Carrying Amount of an Asset over its Recoverable Amount.

Carrying Amount

Carrying Amount = Cost - Accumulated Depreciation

Depreciation Calculation (Straight line) : (Cost - Salvage Value) / Number of Useful life

2019 = ($12,200,000 - $0) / 8

= $1,525,000

2020 = $12,200,000 - $1,525,000 / 5

= $2,135,000

Note the change in useful life is applied from beginning of the year hence (4+1) years.Also the adjustment is only made in 2019 not retrospectively.

Carrying Amount = $12,200,000 - $1,525,000 - $2,135,000

= $ 8,540,000

Recoverable Amount

Is the higher of :

Fair Value less Cost to sell : $6,832,000 or,Value in use : $7,686,000

Therefore Recoverable amount is $7,686,000

Impairment test

Carrying Amount : $ 8,540,000 > Recoverable amount : $7,686,000

The equipment is impaired.

Impairment loss is $ 8,540,000 - $7,686,000 = $854,000

Journal Entry - Impairment

Debit : Impairment Loss, $854,000

Credit: Accumulated Impairment Loss, $854,000

Journal entry - Depreciation

Debit : Depreciation expense, $2,135,000

Credit : Accumulated Depreciation, $2,135,000

Answer from: Quest

The advantage of administering personality tests on employees is that it will allow the employer to know the mindset and personality of the employee. this will allow the employer to at least have an idea as to how the employee works and how his attitude in the workplace. the disadvantage is that it may make the employee a little anxious as to whether he would meet the personality requirements of the employer and whether he would be able to retain the job or not.

Answer from: Quest

answer; planning;

Another question on Business

Business, 21.06.2019 21:30

The following balance sheet for the los gatos corporation was prepared by a recently hired accountant. in reviewing the statement you notice several errors. los gatos corporation balance sheet at december 31, 2018 assets cash $ 44,000 accounts receivable 86,000 inventories 57,000 machinery (net) 122,000 franchise (net) 32,000 total assets $ 341,000 liabilities and shareholders' equity accounts payable $ 54,000 allowance for uncollectible accounts 7,000 note payable 59,000 bonds payable 112,000 shareholders' equity 109,000 total liabilities and shareholders' equity $ 341,000 additional information: cash includes a $22,000 restricted amount to be used for repayment of the bonds payable in 2022. the cost of the machinery is $194,000. accounts receivable includes a $22,000 note receivable from a customer due in 2021. the note payable includes accrued interest of $7,000. principal and interest are both due on february 1, 2019. the company began operations in 2013. income less dividends since inception of the company totals $37,000. 52,000 shares of no par common stock were issued in 2013. 200,000 shares are authorized. required: prepare a corrected, classified balance sheet. (amounts to be deducted should be indicated by a minus sign.)

Answers: 2

Answer

Business, 22.06.2019 10:20

Blue spruce corp. has the following transactions during august of the current year. aug. 1 issues shares of common stock to investors in exchange for $10,170. 4 pays insurance in advance for 3 months, $1,720. 16 receives $710 from clients for services rendered. 27 pays the secretary $740 salary. indicate the basic analysis and the debit-credit analysis.

Answers: 1

Answer

Business, 22.06.2019 16:10

The brs corporation makes collections on sales according to the following schedule: 30% in month of sale 66% in month following sale 4% in second month following sale the following sales have been budgeted: sales april $ 130,000 may $ 150,000 june $ 140,000 budgeted cash collections in june would be:

Answers: 1

Answer

Business, 22.06.2019 17:30

An essential element of being receptive to messages is to have an open mind true or false

Answers: 2

Answer

You know the right answer?

Blue Company uses special strapping equipment in its packaging business. The equipment was purchased...

Questions