Reference no: EM132704114

Gapco Construction Co. acquired all assets and liabilities of Mainland Excavation Co. for $1,840 in cash on January 1, 2018. Mainland Excavation had just one asset at the time of the acquisition; a new excavator with a fair value of $2,000, and liabilities of $800 assumed that were assumed by Gapco. Gapco recorded these amounts and the associated goodwill in its books. The acquired company subsequently became a subsidiary of Gapco.

The following is accounting and other information relating to the excavator:

• Acquisition Cost: $2000.
• Estimated residual Value: $ 400 
• Estimated useful life: 10 years
• Depreciation method: Double Declining Balance

The following events occurred in 2019

1. The excavator sustained fire damage on January 1, 2020.
2. The estimated undiscounted future cash flow of the excavator following damage was estimated at $1,200, and the fair value was estimated at $880. 
3. The event did not affect the fair value of the Mainland Excavation subsidiary.

Required:

Question 1. Determine the depreciation expense of the equipment for the year ended December 31 2019. Enter your answer in the following box.

Question 2. Is there an impairment loss of the excavator following the fire damage in 2020?

Question 3. Determine the impairment loss following the fire damage in 2020, if any. Insert your answer in the following box.

Question 4. Determine the balance of the goodwill account following the fire damage in 2020.