Robert Sporting Goods Company has another piece of equipment (Q102) with the following cost and accumulated depreciation at its year ended December 31, 2020: Equipment (Q102) $9 000 000 Accumulated Depreciation 3 000 000 Due to obsolescence and physical damage, the equipment was found to be impaired. At the year-end Robert Sporting Goods Company had determined the following information: Fair value less cost of Disposal $4 500 000 Value in use or discounted net cash flows 4 000 000 Undiscounted net cash flows 5 500 000 Required: Assess equipment (Q102) for impairment and prepare the journal entry (if necessary) to report any impairment loss for the year. When selecting from dropdown lists, if a line item does not apply, select NA and place zero in the field in the number column. Do not leave any number fields blank.
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.
Case E
Robert Sporting Goods Company has another piece of equipment (Q102) with the following cost and
Equipment (Q102) $9 000 000
Accumulated Depreciation 3 000 000
Due to obsolescence and physical damage, the equipment was found to be impaired. At the year-end Robert Sporting Goods Company had determined the following information:
Fair value less cost of Disposal $4 500 000
Value in use or discounted net
Undiscounted net cash flows 5 500 000
Required:
Assess equipment (Q102) for impairment and prepare the
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