Question

On January 1, 2018, Aylmer Inc purchased a piece of equipment. The equipment is expected to
produce 25,000 units over it's useful life. The equipment cost $520,000.
Units produced:				Other IMPORTANT information:
	2018	3000		Fair value at:
	2019	3200			31-Dec-20	$       306,500
	2020	3800
	2021	4300		Balance in Revaluation Surplus:			$            1,375
	2022	3700
	2023	3600
	2024	3600
REQUIRED:
Prepare all necessary journal entries at:
	01-Jan-18
	31-Dec-18
	31-Dec-19
	31-Dec-20						The units each year is posted. This is the only information in the question.

Answer 1

Date	Accounts and Explanations	Debit ($)	Credit ($)
Jan 1, 18	Equipment dr. To cash (Equipment purchased for cash)	520,000	. 520,000
Dec 31, 18	Depreciation dr. To Accumulated depreciation (Depreciation on Equipment for 1 year)	62,400	. 62,400
Dec 31, 19	Depreciation dr. To Accumulated depreciation (Depreciation on Equipment for 1 year)	66,560	. 66,560
Dec 31, 20	Depreciation dr. To Accumulated depreciation (Depreciation on Equipment for 1 year)	79,040	. 79,040
Dec 31, 20	Impairment Loss dr: To Equipment (Impairment loss on Equipment: Book Value minus Fair value)	5,500	. 5,500

.

Loss on Impairment:

Accumulated Depreciation till 2020: $208,000

Original Cost: $520,000

Net Value of Equipment: $312,000 (520,000 - 208,000)

.

Fair value: $306,500

.

Loss on Impairment

= Net Value of Equipment - Fair value

= 312,000 - 306,500

= 5,500

.

.......

Feel free to ask any doubt.