Innovative Inc. has a piece of equipment with a carrying amount of $187,000. Technology has changed, indicating that the machine may be impaired. A new machine with updated technology could be purchased for $358,000. A used machine of similar vintage is listed on-line for $168,000. The estimated discounted cash flows from continuing to use the asset are $156,000. The undiscounted cash flows from the use of the asset are $188,000. The estimated value if the company sold the asset less commission costs is $163,000. Required: 1. What is the recoverable amount
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Innovative Inc. has a piece of equipment with a carrying amount of $187,000. Technology has changed, indicating that the machine may be impaired. A new machine with updated technology could be purchased for $358,000. A used machine of similar vintage is listed on-line for $168,000. The estimated discounted
Required:
1. What is the recoverable amount?
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2. What is the amount of impairment?
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Solved in 4 steps
- Dexter Inc. acquired a machine on January 1, 2010 for $520,000. The machine had an expected life of 20 years and salvage value of $40,000. Dexter uses straight line depreciation. On July 1, 2020, the company reviewed the machine for impairment and determined that its undiscounted future net cash flows totaled $200,000 and its discounted future net cash flows totaled $154,000. If no active market exists for the machine and the company plans to continue operating it, what should Dexter record as an impairment loss on July 1, 2020? Compute the carrying value of the machine on July 1, 2020. Is the machine impaired? Explain the basis of your conclusion. Include numbers. Compute the amount of impairment loss recorded on July 1, 2020 (if any). Compute the carrying value of the machine on December 31, 2020, assuming no change in its service life and salvage value.Blake Corporation has determined that one of its machines has experienced an impairment in value. However, the company expects to continue to use the asset for another 3 full years because no active market exists for this machine. Selected information on the impaired asset (on the date that impairment was determined to exist) is provided below. Original cost of the machine $22,000 Carrying amount of the machine 20, 000 Undiscounted future cash flows expected to be generated by the machine 15,000 Fair value of the machine (determined by calculating the present value of the future cash flows expected to be generated by the machine) 12,000 What is the amount of the impairment loss to be recorded by Blake? $3,000 $5,000 $7,000 $8,000Madison Company purchased a machine on February 1, 2018, for $200,000. On December 31, 2021, when the book value of the machine is $90,000, Madison Company checks to see if the machine is impaired. Due to recent technological advances Madison Company expects the machine to generate future cash flows of $70,000. If Madison Company estimates the current fair market value of the machine is $55,000 on December 31, 2021, what amount of impairment loss (if any) should be recorded? $20,000 O $35.000 O $60,000 O $90,000 O The asset is not impaired.
- Lou Lou and Company purchased a piece of machinery 2 years ago for $50,000 and has depreciation to date of $15,000. The fair market value of the asset is $30,000, but the company believes it can achieve $34,000 in net future cash flows from the asset. Costs to dispose of the asset is $200. Assuming the asset is held for use, determine if the asset is impaired. If so, what is the amount of the write-off? The asset is impaired and Lou Lou should record a $1,000 loss on impairment. The asset is impaired and Lou Lou should record a $5,200 loss on impairment. The asset is NOT impaired. The asset is impaired and Lou Lou should record a $5,000 loss on impairment.On January 1, 2015, Vallahara Company purchased machinery for $650,000, which it installed in a rented factory. It is depreciating the machinery over 12 years by the straight-line method to a residual value of $50,000. Late in 2019, because of increasing competition in the industry, the company believes that its asset may be impaired and will have a remaining useful life of 5 years, over which it estimates the asset will produce total cash inflows of $1,000,000 and will incur total cash outflows of $825,000. The cash flows are independent of the company’s other activities and will occur evenly each year. Vallahara is not able to determine the fair value based on a current selling price of the machinery. Vallahara’s discount rate is 10%. Required: 1. Prepare schedules to determine whether, at the end of 2019, the machinery is impaired and, if so, the impairment loss to be recognized. 2. If the machinery is impaired, prepare the journal entry to record the impairment. 3. If…Sheridan Company uses special strapping equipment in its packaging business. The equipment was purchased in January 2024 for $10,700,000 and had an estimated useful life of 8 years with no salvage value. At December 31, 2025, new technology was introduced that would accelerate the obsolescence of Sheridan's equipment. Sheridan's controller estimates that expected future net cash flows on the equipment will be $6,741,000 and that the fair value of the equipment is $5,992,000. Sheridan intends to continue using the equipment, but it is estimated that the remaining useful life is 4 years. Sheridan uses straight-line depreciation. Prepare the journal entry (if any) to record the impairment at December 31, 2025. (If no entry is required, select "No entry" for the account titles and enter o for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually. List debit entry before credit entry.) Date Dec. 31 Account Titles and Explanation…
- Robertson Inc. bought a machine on January 1, 2000 for $300,000. The machinehad an expected life of 20 years and was expected to have a salvage value of$30,000. Robertson uses straight-line depreciation. On July 1, 2010, the companyreviewed the potential of the machine and determined that its undiscounted futurenet cash flows totaled $150,000 and its discounted future net cash flows totaled$105,000. If no active market exists for the machine and the company does notplan to dispose of it, what should Robertson record as an impairment loss on July1, 2010?a. $ 0b. $ 8,250c. $15,000d. $53,250On January 1, 2022, the Vallahara Company purchased machinery for P 650,000 which it installed in a rented factory. It is depreciating the machinery over 12 years by the straight-line method to a residual value of P 50,000. Late in 2026, because of increasing competition in the industry, the company believes that its asset may be impaired and will have a remaining useful life of five years, over which it estimates the asset will produce total cash inflows of P 1,000,000 and will incur total cash outflows of P 825,000. The cash flows are independent of the company's other activities and will occur evenly each year. The company is not able to determine the fair value based on a current selling price of the machinery. The company's discount rate is 10%. Required 1. Prepare schedules to determine whether, at the end of 2026, the machinery is impaired and, if so, the impairment loss to be recognized. 2. If the machinery is impaired, prepare the journal entry to record the impairment.…On January 1, 2022, the Vallahara Company purchased machinery for P 650,000 which it installed in a rented factory. It is depreciating the machinery over 12 years by the straight-line method to a residual value of P 50,000. Late in 2026, because of increasing competition in the industry, the company believes that its asset may be impaired and will have a remaining useful life of five years, over which it estimates the asset will produce total cash inflows of P 1,000,000 and will incur total cash outflows of P 825,000. The cash flows are independent of the company’s other activities and will occur evenly each year. The company is not able to determine the fair value based on a current selling price of the machinery. The company’s discount rate is 10%. Required 1. Prepare schedules to determine whether, at the end of 2022, the machinery is impaired and, if so, the impairment loss to be recognized. 2. If the machinery is impaired, prepare the journal entry…
- On January 1, 2014, Borstad Company purchased equipment for $1,150,000. It is depreciating the equipment over 25 years using the straight-line method and a zero residual value. Late in 2019, because of technological changes in the industry and reduced selling prices for its products, Borstad believes that its equipment may be impaired and will have a remaining useful life of 8 years. Borstad estimates that the equipment will produce cash inflows of $450,000 and will incur cash outflows of $342,000 each year for the next 8 years. It is not able to determine the fair value of the equipment based on a current selling price. Borstad’s discount rate is 14%. Required: 1. Prepare schedules to determine whether, at the end of 2019, the equipment is impaired and, if so, the impairment loss to be recognized. 2. Prepare the journal entry to record the impairment. 3. Next Level How would your answer to Requirement 1 change if the discount rate was 18% and the cash flows were expected…In 2018, Batman Company ( an IFRS reporter) acquired equipment at a cost of $620,000. The balance of accumulated depreciation is $340,000. The sum of the discounted future cash flows expected from the use of this asset is $290,000 and the asset's current fair value is $250,000 before considering costs of disposal of $5,000. What is the recoverable amount?On January 1, 2014, Borstad Company purchased equipment for $1,200,000. It is depreciating the equipment over 25 years using the straight-line method and a zero residual value. Late in 2019, because of technological changes in the industry and reduced selling prices for its products, Borstad believes that its equipment may be impaired and will have a remaining useful life of 8 years. Borstad estimates that the equipment will produce cash inflows of $400,000 and will incur cash outflows of $293,000 each year for the next 8 years. It is not able to determine the fair value of the equipment based on a current selling price. Borstad’s discount rate is 10%. Required: 1. Prepare schedules to determine whether, at the end of 2019, the equipment is impaired and, if so, the impairment loss to be recognized. 2. Prepare the journal entry to record the impairment. 3. Next Level How would your answer to Requirement 1 change if the discount rate was 14% and the cash flows were…