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On 30 June 2017 You Can Cook Pty Ltd purchased equipment at a cost of $625,000...

On 30 June 2017 You Can Cook Pty Ltd purchased equipment at a cost of $625,000 (GST exclusive) with an estimated useful life of 10 years and no residual value. On 30 June 2020, the equipment had a carrying amount of $437 500.

On 30 June 2020 the same item of equipment was determined as having a recoverable amount of $350 000 and a remaining useful life of 7 years.

On 30 June 2023, the equipment was assessed as having a recoverable amount of $260 000 and a remaining useful life of 3 years.

All equipment is carried under the cost model.

Prepare the general journal entries to record the impairment of equipment and depreciation

under the cost model on 30 June 2020, 30 June 2023 and 30 June 2024.

Please note the depreciation expense for the equipment has not been recorded for the year 2020 (ended 30 June 2020).

Narrations are not required

General Journal
Date	Account	Debit	Credit

Expert Solution

Ans:

Working note: on 30th june 2020, carrying amount of equipment= $ 625000- 625000/10*3 =$ 437500

Recoverable amount on 30th june 2020 is $350000

Impairment on 30th june is 437500- $ 350000 =$ 87500

Depreciation for 30 june 2020 is 625000/10 = $ 62500

On 30th june 2023 ,Carrying amount is $ 625000- $ 625000/10*6 = $ 250000

Recoverable amount on 30th june 2023 is $ 260000, No impairment on 30 june 2023

Depreciation for year ended on 30 june 2024 is $250000/3 =$ 83333 Approx

Journal enteries for impairment and Depreciation as below:

Date Account DEBIT CREDIT

30th june Impairment loss aic Dr. $87500

To equipment a/c Cr $ 87500

Depreciation a/c Dr $ 62500

To equipment a/c Cr $ 62500

30 june 2023 Depreciation a/c Dr $ 62500

To equipment a/c Cr. $62500

30 june 2024 Depreciation a/c Dr $ 83333

To equipment a/c Cr. $ 83333*

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