(3 points) The management of Balboa Inc. was discussing whether certain equipment should be written off as a charge to current operations because of obsolescence. This equipment has a cost of $825,000 with depreciation to date of $400,000 as of December 31, 2014. On December 31, 2014, management projected its future net cash flows from this equipment to be $390,000 and its fair value to be $365,000. The company intends to use this equipment in the future. Instructions (a) Prepare the journal entry (if any) to record the impairment at December 31, 2014. g

Impairment Loss $35,000 (debit)

Accumulated Impairment Loss $35,000 (credit)

Explanation:

Impairment of an Asset occurs when the Carrying Amount of an Asset exceed its Recoverable Value.

Carrying Amount Calculation

Carrying Amount = Cost - Accumulated Depreciation

                             = $825,000 - $400,000

                             = $ 425,000

Recoverable Value Determination

Recoverable Value of an Asset is the Higher of

Value in Use of the Asset = $390,000

Fair Value Less Cost to Sell = $365,000

Therefore, the Recoverable Amount is $390,000

Impairment Analysis

Carrying Amount, $ 425,000 > Recoverable Amount $390,000.

Therefore the Equipment is Impaired

Impairment loss is $35,000

Journal

Impairment Loss $35,000 (debit)

Accumulated Impairment Loss $35,000 (credit)

idk the answer so dont listen to me but 23

the answer is a.

by: nicholas dooley