As of December 31, 2020, the equipment had a salvage value of $4,000 and is expected to produce 100,000 additional units over its remaining useful life. Urithiru uses an activity-based depreciation method and the equipment produced 24,000 units in 2021. At December 31, 2021, the fair value of the equipment is $16,000 and the undiscounted expected future net cash flow is $18,000. How much impairment loss or loss recovery would be recognized at 12/31/2021?

Hi, the question you have provided has missing information, however important principles are explained below :

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

Carrying Amount

Carrying Amount = Cost - Accumulated Depreciation

The question has missing information on the cost of the equipment.

However the formula to calculate depreciation is :

Depreciation Expense = (Cost - Salvage Value) × Activity during the year / Estimated Total Activity

Recoverable Amount

Is the higher of :

The question provided an undiscounted expected future net cash flow of $18,000 which needs to be discounted using the company`s cost of capital to get the Value in use.

Then determine the recoverable amount.

Test for Impairment

If Carrying Amount > Recoverable Amount, then the asset is impaired

Journal Entry

Debit : Impairment loss expense with the amount of impairment (the excess)

Credit : Accumulated Impairment loss with the amount of impairment (the excess)                            

you get one warning and if you do something to violate the guidelines of after that you get kicked off.

mark as

i might look it up later.