The information that follows relates to equipment owned by Pearl Limited at December 31, 2023: Cost $8,280,000 Accumulated depreciation to date 920,000 Expected future net cash flows (undiscounted) 6,440,000 Expected future net cash flows (discounted, value in use) 5,842,000 Fair value 5,704,000 Costs to sell (costs of disposal) 46,000 At December 31, 2023, Pearl discontinues use of the equipment and intends to dispose of it in the coming year by selling it to a competitor. It is expected that the costs of disposal will total $46,000. (a1-a3) Your answer is partially correct. Assume that Pearl is a private company that follows ASPE. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. List all debit entries before credit entries.) 1. Prepare the journal entry at December 31, 2023, to record asset impairment, if any. 2. Prepare the journal entry to record depreciation expense for 2024. 3. Assume that the asset was not sold by December 31, 2024. The equipment's fair value (and recoverable amount) on this date is $5.98 million. Prepare the journal entry, if any, to record the increase in fair value. It is expected that the costs of disposal will total $46,000. No. Account Titles and Explanation (1) Loss on Impairment Accumulated Depreciation - Equipment (2) No Entry Debit 1518000 Credit 0 0 1518000 0 No Entry (3) Accumulated Depreciation - Equipment 92000 Recovery of Loss from Impairment 0 0 92000
The information that follows relates to equipment owned by Pearl Limited at December 31, 2023: Cost $8,280,000 Accumulated depreciation to date 920,000 Expected future net cash flows (undiscounted) 6,440,000 Expected future net cash flows (discounted, value in use) 5,842,000 Fair value 5,704,000 Costs to sell (costs of disposal) 46,000 At December 31, 2023, Pearl discontinues use of the equipment and intends to dispose of it in the coming year by selling it to a competitor. It is expected that the costs of disposal will total $46,000. (a1-a3) Your answer is partially correct. Assume that Pearl is a private company that follows ASPE. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. List all debit entries before credit entries.) 1. Prepare the journal entry at December 31, 2023, to record asset impairment, if any. 2. Prepare the journal entry to record depreciation expense for 2024. 3. Assume that the asset was not sold by December 31, 2024. The equipment's fair value (and recoverable amount) on this date is $5.98 million. Prepare the journal entry, if any, to record the increase in fair value. It is expected that the costs of disposal will total $46,000. No. Account Titles and Explanation (1) Loss on Impairment Accumulated Depreciation - Equipment (2) No Entry Debit 1518000 Credit 0 0 1518000 0 No Entry (3) Accumulated Depreciation - Equipment 92000 Recovery of Loss from Impairment 0 0 92000
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Transcribed Image Text:The information that follows relates to equipment owned by Pearl Limited at December 31, 2023:
Cost
$8,280,000
Accumulated depreciation to date
920,000
Expected future net cash flows (undiscounted)
6,440,000
Expected future net cash flows (discounted, value in use)
5,842,000
Fair value
5,704,000
Costs to sell (costs of disposal)
46,000
At December 31, 2023, Pearl discontinues use of the equipment and intends to dispose of it in the coming year by selling it to a
competitor. It is expected that the costs of disposal will total $46,000.
(a1-a3)
Your answer is partially correct.
Assume that Pearl is a private company that follows ASPE. (Credit account titles are automatically indented when the amount is
entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. List all debit
entries before credit entries.)
1.
Prepare the journal entry at December 31, 2023, to record asset impairment, if any.
2.
Prepare the journal entry to record depreciation expense for 2024.
3.
Assume that the asset was not sold by December 31, 2024. The equipment's fair value (and recoverable amount) on this
date is $5.98 million. Prepare the journal entry, if any, to record the increase in fair value. It is expected that the costs of
disposal will total $46,000.
No. Account Titles and Explanation
(1)
Loss on Impairment
Accumulated Depreciation - Equipment
(2)
No Entry
Debit
1518000
Credit
0
0
1518000
0
No Entry
(3)
Accumulated Depreciation - Equipment
92000
Recovery of Loss from Impairment
0
0
92000
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