Question

Presented below is information related to equipment owned by Coronado Company at December 31, 2020. Cost (residual value $0) $8,994,100 Accumulated depreciation to date 1,007,300 Value-in-use 5,490,200 Fair value less cost of disposal 4,399,930 Assume that Coronado intends to dispose of the equipment in the coming year. As of December 31, 2020, the equipment has a remaining useful life of 8 years. Coronado uses straight-line depreciation.

(a) Prepare the journal entry (if any) to record the impairment of the asset at December 31, 2020. (If no entry is required, select "No entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.) Account Titles and Explanation Debit Credit

Answer 1

Recoverable amount =Greater of Vaue in use or Fair value less cost of disposal

                       = Greater of 5490200 or 4399930

                      = 5,490,200

Book value or carrying value =Cost -accumulated depreciation

                = 8994100-1007300

               = 7,986,800

Impairment loss = carrying value - recoverable amount

                       =7,986,800 - 5,490,200

                       = 2,496,600

Date	Account title	Debit	credit
31 December ,2020	Impairment loss	2,496,600
	Equipment		2,496,600