Presented below is information related to equipment owned by Vaughn Company at December 31, 2025. Cost Accumulated depreciation to date Expected future net cash flows Fair value Date $10,350,000 Assume that Vaughn will continue to use this asset in the future. As of December 31, 2025, the equipment has a remaining useful life of 4 years. Dec. 31 1,150,000 Prepare the journal entry (if any) to record the impairment of the asset at December 31, 2025. (If no entry is required, select "No entry" for the account titles and enter O for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually. List debit entry before credit entry.) 8,050,000 5,520,000 Loss on Impairment Account Titles and Explanation Accumulated Depreciation - Equipment Debit 3680000 Credit 3680000

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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.