E10.16B (LO 2) (Impairment) Presented below is information related to equipment owned by Davis Company at December 31, 2025. Cost $6,750,000 750,000 5,250,000 3,600,000 Accumulated depreciation to date Expected future net cash flows Fair value Assume that Davis will continue to use this asset in the future. As of December 31, 2025, the equipment has a remaining useful life of 4 years and no salvage value. Instructions a. Prepare the journal entry (if any) to record the impairment of the asset at December 31, 2025. b. Prepare the journal entry to record depreciation expense for 2026. Use straight-line method. c. The fair value of the equipment at December 31, 2026, is $3,825,000. Prepare the journal entry (if any) necessary to record this increase in fair value.

E10.16B (LO 2) (Impairment) Presented below is information related to equipment owned by Davis Company at December 31, 2025. Cost $6,750,000 750,000 5,250,000 3,600,000 Accumulated depreciation to date Expected future net cash flows Fair value Assume that Davis will continue to use this asset in the future. As of December 31, 2025, the equipment has a remaining useful life of 4 years and no salvage value. Instructions a. Prepare the journal entry (if any) to record the impairment of the asset at December 31, 2025. b. Prepare the journal entry to record depreciation expense for 2026. Use straight-line method. c. The fair value of the equipment at December 31, 2026, is $3,825,000. Prepare the journal entry (if any) necessary to record this increase in fair value.

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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P11.2 (LO 1, 2) (Deprec. for partial periods - SL, Act., SYD, and Declining - Balance) The cost of equip. purchased by Charleston, Inc. on June 1, 2020, is $89,000. It is estimated that the machine will have a $5,000 salvage value at the end of it's service life. It's service life is estimated at 7 years, it's total working hours are estimated at 42,000, and it's total production is estimated at 525,000 units. During 2020, the machine was operated 6,000 hours and produced 55,000 units. During 2021, the machine was operated 5,500 hours and produced 48,000 units. Instructions: Compute deprec. expense on the machine for the year ending Dec. 31, 2020, and the year ending Dec. 31, 2021, using the following methods. a. Straight-line. b. Units-of-output. c. Working hours. d. Sum-of-the-years'-digits. e. Declining-balance (twice the straight-line rate).
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Presented below is information related to Wolfie Corp.’s equipment on 12/31/2022: Description Amount Capitalized cost $900,000 Accumulated depreciation to date 750,000 Estimated residual value 40,000 Expected future cash flows 125,000 Estimated Fair value 100,000 The amount of the impairment loss, if any, that Wolfie Corp. should record on 12/31/22 is: $45,000 $50,000 $10,000 $20,000 $25,000 There is no impairment.
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