Coronado Inc. purchased equipment for $1404000 in 2025. Three years later, the equipment has accumulated depreciation of $553000 and Coronado has concerns that the equipment has been impaired. Future cash flows are estimated to be $893000. The current fair value of the equipment is estimated to be approximately $702000. The journal entry to record the impairment loss on the equipment will include O credit to Loss on Impairment for $74500. O credit to Accumulated Depreciation - Equipment for $74500. O credit to Accumulated Depreciation - Equipment for $21222. O no impairment has occurred, so no journal entry is required.

Coronado Inc. purchased equipment for $1404000 in 2025. Three years later, the equipment has accumulated depreciation of $553000 and Coronado has concerns that the equipment has been impaired. Future cash flows are estimated to be $893000. The current fair value of the equipment is estimated to be approximately $702000. The journal entry to record the impairment loss on the equipment will include O credit to Loss on Impairment for $74500. O credit to Accumulated Depreciation - Equipment for $74500. O credit to Accumulated Depreciation - Equipment for $21222. O no impairment has occurred, so no journal entry is required.

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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Concept explainers

Capital Gain

Any capital asset when sold can give the seller a higher or lower price from its purchase price leading to a capital gain or capital loss. The time period of holding an asset is decided based on if it is a long term or short-term capital gain. On that basis, the rate of taxation is decided if it is 20%, 15% or according to the tax brackets. The rate of taxation differs in the case of equity or debt, whether long or short term. The capital gain can be adjusted from capital loss to arrive at a net capital gain. The amount of gains and the exemption has to be reported in the tax return filed in the financial year in which the asset was transferred. The tax return can be filed quarterly, monthly, semi-annually or annually.

Question

Coronado Inc. purchased equipment for $1404000 in 2025. Three years later, the equipment has accumulated depreciation of
$553000 and Coronado has concerns that the equipment has been impaired. Future cash flows are estimated to be $893000. The
current fair value of the equipment is estimated to be approximately $702000. The journal entry to record the impairment loss on the
equipment will include
O credit to Loss on Impairment for $74500.
O credit to Accumulated Depreciation - Equipment for $74500.
O credit to Accumulated Depreciation - Equipment for $21222.
O no impairment has occurred, so no journal entry is required.

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