Question

In: Accounting

Hach Co has recorded depreciation on its equipment, but believes it may be impaired due to...

Hach Co has recorded depreciation on its equipment, but believes it may be impaired due to technological obsolescence. The net book value of machinery is $35,000 (cost: $52,500; Accumulated depreciation: $17,500). Forecasted annual future cash flows for the machinery are $6,000 for 6 years with no residual value. The company uses a discount rate of 4%. The fair value of the asset is $29,000, and it would cost $1,000 to sell. Depreciation has already been taken in 2020.

Instructions:

(a) Calculate and journalize impairment (if necessary) using:

(i) the rational entity impairment model

(ii) the cost recovery model

(b) Calculate depreciation expense for 2021 under the double declining balance method (remaining useful life is 6 years at beginning of 2021) assuming Hach reports under IFRS.

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