Presented below is information related to equipment owned by Bramble Company at December 31, 2020. Cost $10,260,000 Accumulated depreciation to date 1,140,000 Expected future net cash flows 7,980,000 Fair value 5,472,000 Bramble intends to dispose of the equipment in the coming year. It is expected that the cost of disposal will be $22,800. As of December 31, 2020, the equipment has a remaining useful life of 5 years. Prepare the journal entry (if any) to record the impairment of the asset at December 31, 2020

Answer and Explanation:

The journal entry to record the impairment of the loss is shown below:

Loss on impairment Dr$3,670,800  

         To Accumulated depreciation - Equipment$3,670,800

(Being the loss on impairment is recorded)

For recording this we debited the loss on impairment as it increased the losses and credited the accumulated depreciation as it increased the balance of accumulated depreciation

Working note:

Cost$10,260,000

Less: Accumulated depreciation-$1,140,000  

Carrying Amount$9,120,000  

Less Fair value-$5,472,000  

Plus: Cost of disposal$22,800  

Loss on impairment$3,670,800

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