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Prepare the journal entry to record the depreciation expense

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Question - At December 31, 2019, Tiger Inc. has the following asset with remaining useful of 8 years and no residual value:

Equipment $125,000

Less: accumulated depreciation (50,000)

Book value (carrying amount) $75,000

On May 4, 2020, a new part with a cost of $27,600 was added to the equipment to improve its productivity. The new part does not change the residual value and the estimated useful life of the equipment. At year end, after performing its annual review for impairment, Tiger Inc. obtains the following data:

Undiscounted future cash flows $62,000

Discounted future cash flows 59,600

Fair value less disposal costs 61,992

At December 31, 2021, the fair value of the asset is estimated to be $58,000 by an independent valuator. Tiger Inc. uses straight-line depreciation method for all its assets.

Required - Assuming Tiger Inc. is a Canadian public company,

a) Is the asset impaired in 2020? If yes, prepare the necessary journal entry to record the impairment loss. Show your calculations. Do not round interim numbers and round the final results to the nearest integer.

b) Prepare the journal entry to record the depreciation expense related to this asset in 2021. Round to the nearest integer.

c) How much impairment loss can be recovered in 2021, if any? Round to the nearest integer.

d) Assume Tiger Inc. is a private company that follows ASPE, is the asset impaired in 2020? If yes, prepare the necessary journal entry to record the impairment loss. Do not round interim numbers and round the final results to the nearest integer.

Reference no: EM132832545

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