Reference no: EM132678535
The information that follows relates to equipment owned by Bonita Limited at December 31, 2017:
Cost--------------- $6,660,000
Accumulated depreciation to date--------------- $740,000
Expected future net cash flows (undiscounted)------------ $5,180,000
Expected future net cash flows (discounted, value in use) $4,699,000
Fair value--------------------------- $4,588,000
Costs to sell (costs of disposal) $37,000
Assume that Bonita will continue to use this asset in the future. As at December 31, 2017, the equipment has a remaining useful life of four years. Bonita uses the straight-line method of depreciation.
Assume that Bonita is a private company that follows ASPE.
Problem 1: Prepare the journal entry at December 31, 2017, to record asset impairment, if any.
Problem 2: Prepare the journal entry to record depreciation expense for 2018.3.
Problem 3: The equipment's fair value at December 31, 2018, is $4.81 million. Prepare the journal entry, if any, to record the increase in fair value.
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