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1.a. Problem Question 1 Sadler Corporation purchased a piece of equipment on January 1, 2018, for $150,000. The equipment has an estimated residual value of $10,000 and an expected useful life of 10 years. On June 30, 2020, Sadler sold the equipment for $95,000. The company uses the straight-line depreciation method. Required: i. Determine the gain or loss on the sale of the equipment. Show all calculations. ii. Prepare all necessary journal entries to record the sale of the equipment and disposal of the equipment.

1.a. Problem Question 1 Sadler Corporation purchased a piece of equipment on January 1, 2018, for $150,000. The equipment has an estimated residual value of $10,000 and an expected useful life of 10 years. On June 30, 2020, Sadler sold the equipment for $95,000. The company uses the straight-line depreciation method. Required: i. Determine the gain or loss on the sale of the equipment. Show all calculations. ii. Prepare all necessary journal entries to record the sale of the equipment and disposal of the equipment.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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1.a. Problem Question 1 1.b. Sadler Corporation purchased a piece of equipment on January 1, 2018, for $150,000. The equipment has an estimated residual value of $10,000 and an expected useful life of 10 years. On June 30, 2020, Sadler sold the equipment for $95,000. The company uses the straight-line depreciation method. Required: i. Determine the gain or loss on the sale of the equipment. Show all calculations. ii. Prepare all necessary journal entries to record the sale of the equipment and disposal of the equipment. Google purchased AI Solutions LLC for $2,300 on January 1, 2020. AI Solutions had just one asset. an AI patent for speeding up smart internet searches. Google assessed the fair value of the AI Solutions patent at $2,200 and assumed $100 in AI Solutions existing liabilities. Accordingly, it recorded goodwill of $200 following the transaction and classified the acquired company as a reporting unit for accounting purposes. Later in the year, Microsoft Corporation, one of Google's closest competitors in the smart internet search engine market, successfully introduced a newer AI technology that speeded up internet traffic at triple the speed of Google's. This development prompted Google to conduct an impairment test of the AI patent and goodwill recorded in the AI Solutions acquisition. following the introduction of Microsoft's new technology, Google estimated the undiscounted cash flow of the patent at $2,100 and a fair value of $1,500. The estimated fair value of the AI Solutions reporting unit was $2,000. Required: i. According to US GAAP rules, a company has to conduct a test of impairment of assets "When events or circumstances indicate the book value of the asset may not be recoverable." An impairment loss of the asset is required only when book value is not recoverable, i.e., when the undiscounted sum of estimated future cash flow from the asses is less than the book value. (a) Determine if an impairment loss of the patent is required (b) calculate the amount of the impairment loss, if any. ii. Determine the goodwill impairment amount. What is the balance of the goodwill account at the end of the year under US GAAP.
Transcribed Image Text:1.a. Problem Question 1 1.b. Sadler Corporation purchased a piece of equipment on January 1, 2018, for $150,000. The equipment has an estimated residual value of $10,000 and an expected useful life of 10 years. On June 30, 2020, Sadler sold the equipment for $95,000. The company uses the straight-line depreciation method. Required: i. Determine the gain or loss on the sale of the equipment. Show all calculations. ii. Prepare all necessary journal entries to record the sale of the equipment and disposal of the equipment. Google purchased AI Solutions LLC for $2,300 on January 1, 2020. AI Solutions had just one asset. an AI patent for speeding up smart internet searches. Google assessed the fair value of the AI Solutions patent at $2,200 and assumed $100 in AI Solutions existing liabilities. Accordingly, it recorded goodwill of $200 following the transaction and classified the acquired company as a reporting unit for accounting purposes. Later in the year, Microsoft Corporation, one of Google's closest competitors in the smart internet search engine market, successfully introduced a newer AI technology that speeded up internet traffic at triple the speed of Google's. This development prompted Google to conduct an impairment test of the AI patent and goodwill recorded in the AI Solutions acquisition. following the introduction of Microsoft's new technology, Google estimated the undiscounted cash flow of the patent at $2,100 and a fair value of $1,500. The estimated fair value of the AI Solutions reporting unit was $2,000. Required: i. According to US GAAP rules, a company has to conduct a test of impairment of assets "When events or circumstances indicate the book value of the asset may not be recoverable." An impairment loss of the asset is required only when book value is not recoverable, i.e., when the undiscounted sum of estimated future cash flow from the asses is less than the book value. (a) Determine if an impairment loss of the patent is required (b) calculate the amount of the impairment loss, if any. ii. Determine the goodwill impairment amount. What is the balance of the goodwill account at the end of the year under US GAAP.
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