Impairment Loss On July 1 of Year 1, Okin Company purchased equipment for $325,000; the estimated useful life was 10 years and the expected salvage value was $25,000. Straight-line depreciation is used. On July 1 of Year 5, economic factors cause the market value of the equipment to decrease to $90,000. On this date, Okin evaluates if the equipment is impaired and estimates future cash flows relating to the use and disposal of the equipment to be $195,000. a. Is the equipment impaired at July 1 of Year 5? Answer b. If the equipment is impaired at July 1 of Year 5, calculate the amount of the impairment loss. Impairment loss = $Answer c. If the equippment is impaired at July 1 of Year 5, prepare the journal entry to record the impairment loss. General Journal Debit Credit July 1 Answer Answer Answer Answer Answer Answer To record impairment loss on equipment.
Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
Impairment Loss
On July 1 of Year 1, Okin Company purchased equipment for $325,000; the estimated useful life was 10 years and the expected salvage value was $25,000. Straight-line
a. Is the equipment impaired at July 1 of Year 5?
Answer
b. If the equipment is impaired at July 1 of Year 5, calculate the amount of the impairment loss.
Impairment loss = $Answer
c. If the equippment is impaired at July 1 of Year 5, prepare the
| General Journal | |||
|---|---|---|---|
| Debit | Credit | ||
| July 1 | Answer | Answer | Answer |
| Answer | Answer | Answer | |
| To record impairment loss on equipment. |
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