The management of Splish Brothers Inc., a small private company that uses the cost recovery impairment model, was discussing whether certain equipment should be written down as a charge to current operations because of obsolescence. The assets had a cost of $870,000, and depreciation of $360,000 had been taken to December 31, 2020. On December 31, 2020, management projected the undiscounted future net cash flows from this equipment to be $350,000, and its fair value to be $220,000. The company intends to use this equipment in the future.
The management of Splish Brothers Inc., a small private company that uses the cost recovery impairment model, was discussing whether certain equipment should be written down as a charge to current operations because of obsolescence. The assets had a cost of $870,000, and depreciation of $360,000 had been taken to December 31, 2020. On December 31, 2020, management projected the undiscounted future net cash flows from this equipment to be $350,000, and its fair value to be $220,000. The company intends to use this equipment in the future.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Do not give image format
Transcribed Image Text:The management of Splish Brothers Inc., a small private company that uses the cost recovery impairment model, was discussing
whether certain equipment should be written down as a charge to current operations because of obsolescence. The assets had a cost
of $870,000, and depreciation of $360,000 had been taken to December 31, 2020. On December 31, 2020, management projected
the undiscounted future net cash flows from this equipment to be $350,000, and its fair value to be $220,000. The company intends to
use this equipment in the future.
Prepare the journal entry, if any, to record the impairment at December 31, 2020. (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.)
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 4 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education