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Prepare an entry to record any adjustments required

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Question - On January 1, 2020, Cherrywood Ltd. purchased equipment. On December 31, 2021, Cherrywood's management became concerned that the equipment may have become obsolete. Other information regarding the equipment is as follows:

Purchase price of equipment $773,052

Estimated useful life at time of purchase of equipment (in years) 8

Estimated residual value of equipment at time of purchase $-

Undiscounted future net cash flows from equipment on December 31, 2021 $595,250

Discounted future net cash flows from equipment on December 31, 2021 $529,773

Fair value of equipment on December 31, 2021 $535,725

Fair value of equipment less costs to sell on December 31, 2021 $530,368

Estimated remaining useful life of equipment as of December 31, 2021 4

Estimated residual value of equipment on December 31, 2021 $-

Assume that Cherrywood has a December 31 year end.

REQUIRED -

A. Assume that Cherrywood Ltd. follows ASPE. Determine the impairment loss, if any, for the asset. Prepare an entry to record any adjustment required.

B. Assume that Cherrywood Ltd. follows IFRS.

a) Determine the depreciation expense for 2022.

b) Determine the impairment loss, if any for the asset. Prepare an entry to record any adjustments required.

Reference no: EM132776554

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