Madison Company purchased a machine on February 1, 2018, for $200,000. On December 31, 2021, when the book value of the machine is $90,000, Madison Company checks to see if the machine is impaired. Due to recent technological advances Madison Company expects the machine to generate future cash flows of $70,000. If Madison Company estimates the current fair market value of the machine is $55,000 on December 31, 2021, what amount of impairment loss (if any) should be recorded?

Madison Company purchased a machine on February 1, 2018, for $200,000. On December 31, 2021, when the book value of the machine is $90,000, Madison Company checks to see if the machine is impaired. Due to recent technological advances Madison Company expects the machine to generate future cash flows of $70,000. If Madison Company estimates the current fair market value of the machine is $55,000 on December 31, 2021, what amount of impairment loss (if any) should be recorded?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

In 2018, Batman Company ( an IFRS reporter) acquired equipment at a cost of $620,000. The balance of accumulated depreciation is $340,000. The sum of the discounted future cash flows expected from the use of this asset is $290,000 and the asset's current fair value is $250,000 before considering costs of disposal of $5,000. What is the recoverable amount?
On January 1, 2014, Borstad Company purchased equipment for $1,150,000. It is depreciating the equipment over 25 years using the straight-line method and a zero residual value. Late in 2019, because of technological changes in the industry and reduced selling prices for its products, Borstad believes that its equipment may be impaired and will have a remaining useful life of 8 years. Borstad estimates that the equipment will produce cash inflows of $450,000 and will incur cash outflows of $341,000 each year for the next 8 years. It is not able to determine the fair value of the equipment based on a current selling price. Borstad’s discount rate is 10%. Required: 1. Prepare schedules to determine whether, at the end of 2019, the equipment is impaired and, if so, the impairment loss to be recognized. 2. Prepare the journal entry to record the impairment. 3. Next Level How would your answer to Requirement 1 change if the discount rate was 14% and the cash flows were expected…
On January 1, 2020, due to the unexpected advances in technology, Bubio Co. realized that its machinery has been impaired. The unit was purchased on January 1, 2016 for P20,000,000. The entity initially estimated that the asset has a useful life of 20 years with no residual value. On that date, the fair value of the asset was P10,000,000. The cash inflows and outflows to be derived from the asset from its continuing use are as follows: End of year Cash inflow Cash outflow 2020 7,500,000 3,500,000 2021 6,000,000 3,000,000 2022 4,000,000 2,000,000 2023 3,000,000 1,500,000 2024 2,500,000 1,000,000 Should the entity decide to continue to use the asset, remaining life will be 5 years. The discount rate used by the entity is 10%. How much is the impairment loss to be recognized on January 1, 2020?
Belkin plc purchases a machine for £110,000 on 1 Jan 2015. The machine has no residual value, and an estimated useful life of 10 years. Belkin plc depreciates such machines yearly using the straight line method. On 1 Jan 2020, Belkin plc's management decides that the useful life was underestimated and should have been 15 years. What will be the annual depreciation charge for the year ended 31 December 2020?
Can you please help me with this through a solution to get the answer? JAY Inc. decided to revalue its machine on December 31, 2019, and determined that the current replacement cost is $1,500,000. The machine, which was purchased last January 1, 2017 for $1,000,000, has a carrying value of $400,000. The entity has been consistent in depreciating its machine using the straight-line method. On September 1, 2021, the entity sold the machine for $140,000. How much is the revaluation surplus as of December 31, 2019 after revaluation?
At the end of 2020, Sawyer Company is conducting an impairment test and needs to develop a fair value estimate for machinery used in its manufacturing operations. Given the nature of Sawyer’s production process, the equipment is for special use. (No secondhand market values are available.) The equipment will be obsolete in 2 years, and Sawyer’s accountants have developed the following cash flow information for the equipment. Year Net Cash FlowEstimate ProbabilityAssessment 2021 $6,000 40% 9,000 60% 2022 $ (500) 20% 2,000 60% 4,000 20% Scrap Value 2023 $ 500 50% 900 50% Instructions Using expected cash flow and present value techniques, determine the fair value of the machinery at the end of 2020. Use a 6% discount rate. Assume all cash flows occur at the end of the year.
Hardev
In 2022, internal auditors discovered that Fay, Inc., had debited an expense account for the $2,640,000 cost of a machine purchased on January 1, 2019. The machine's useful life was expected to be 16 years with no residual value. Straight-line depreciation is used by Fay. The journal entry to correct the error will include a credit to accumulated depreciation of. A) $495,000. B) $2,145,000. $330,000. $165,000.
On March 1, 2019, Extreme Company exchanged an old machine having a cost of P450,000 and accumulated depreciation of P100,000 for another machine having a fair market value of P300,000. Extreme Company has to pay P72,000 to even up the trade. Immediately after the exchange. Extreme company determined that the cash flows of the machine received differ from the cash flows of the machine transferred. 51. What is the cost of the machine in the books of Extreme? a. P280,000 b. P300,000 c. P440,000 d. P600,000 52. What amount of loss should the company recognize on the exchange? a. None b. P50,000 c. P122,000 d. P150,000
On January 1, 2014, Borstad Company purchased equipment for $1,150,000. It is depreciating the equipment over 25 years using the straight-line method and a zero residual value. Late in 2019, because of technological changes in the industry and reduced selling prices for its products, Borstad believes that its equipment may be impaired and will have a remaining useful life of 8 years. Borstad estimates that the equipment will produce cash inflows of $450,000 and will incur cash outflows of $342,000 each year for the next 8 years. It is not able to determine the fair value of the equipment based on a current selling price. Borstad’s discount rate is 14%. Required: 1. Prepare schedules to determine whether, at the end of 2019, the equipment is impaired and, if so, the impairment loss to be recognized. 2. Prepare the journal entry to record the impairment. 3. Next Level How would your answer to Requirement 1 change if the discount rate was 18% and the cash flows were expected…
On January 1, 2020, due to the unexpected advances in technology, Claro Co. realized that its machinery has been impaired. The unit was purchased on January 1, 2016 for P20,000,000. The entity initially estimated that the asset has a useful life of 20 years with no residual value. On that date, the fair value of the asset was P10,000,000. The cash inflows and outflows to be derived from the asset from its continuing use are as follows: End of year Cash inflow Cash outflow 2020 7,500,000 3,500,000 2021 6,000,000 3,000,000 2022 4,000,000 2,000,000 2023 3,000,000 1,500,000 2024 2,500,000 1,000,000 Should the entity decide to continue to use the asset, remaining life will be 5 years. The discount rate used by the entity is 10%. How much is the impairment loss to be recognized on January 1, 2020?
help me to solve this problem