Question

The SOO Company has machinery that it acquired a number of years ago at a cost of $812,000. As of December 31, 2012 the company has recorded life-to-date depreciation in the amount of $332,900. Because of changes in their manufacturing processes, the equipment does not function as well as the company originally anticipated. As of December 31, 2012 the company has estimated that the fair value of the machinery is $302,000 and the projected future net cash flows from this machinery will be $426,000.

Instructions:

A. Prepare the journal entry necessary, if any, to record an impairment at December 31, 2012.

B. How should a gain or loss, if any, on the impairment be presented on the income statement?

C. As of December 31, 2013 the fair value of the machinery increased to $326,000. Prepare the journal entry necessary, if any, to record this increase.

Related Questions

Quayle Company acquired machinery on January 1, 2002 which it depreciated under the straight-line m... You are replacing an old piece of machinery with a new one that offers improved technology and effic... A company purchased machinery for $660,000 on May 1,2008. It is estimated that it will have a useful... A factory installs new machinery that will save 1250−38x dollars per year, where x is the number of...