Question

Presented below is information related to equipment owned by ACtiv Company on December 31, 2018.

                        Cost                                                               €10,000,000

                        Accumulated depreciation to date                  2,500,000

                        Value-in-use                                                   6,000,000

                        Fair value less the cost of disposal 5,400,000

Assume that ACtiv will continue to use this asset in the future. As of December 31, 2018, the equipment has a remaining useful of 4 years.

Instructions

(a)      Prepare the journal entry (if any) to record the impairment of the asset at December 31, 2018.

(b)      Prepare the journal entry to record depreciation expense for 2019.

(c)      The recoverable amount of the equipment on December 31, 2019, is €5,250,000. Prepare the journal entry (if any) necessary to record this increase.

please i need this question quickly

Answer 1

(a)	Date	General Journal	Debit	Credit
	Dec 31, 2018	Loss on Impairment	1,500,000
		Accumulated Depreciation—Equipment		1,500,000
	Working
		Cost	10,000,000
		Accumulated depreciation	2,500,000
		Carrying amount	7,500,000
		Recoverable amount	6,000,000
		Loss on impairment	1,500,000
(b)	Date	General Journal	Debit	Credit
	Dec 31, 2019	Depreciation Expense	1,500,000
		Accumulated Depreciation—Equipment		1,500,000
	Working
		New carrying amount	6,000,000
		Useful Life	4 years
		Depreciation per year	1,500,000
(c)	Date	General Journal	Debit	Credit
	Dec 31, 2019	Accumulated Depreciation—Equipment	750,000
		Recovery of Impairment Loss		750,000
		[5,250,000 - (6,000,0000 - 1,5000,000)]