Answer:
Explanation:
a)Purchase cost - 1,180,000
Useful life - 25
Annual depreciation = 47,200
Timeline - Jan 1 , 2014 - 2019 = 6 years
Accumulated depreciation = 47200*6=283,200
Carrying value at 2019 = (1,180,000 - 283,200)= 896,800
B) Annual cash flow - 400,000
Annual cash outflow - (295,000)
Net cash inflow= 105,000
Net cash flow for 8 years = 105000*8 = 840000
Since the net cash inflow is less than the carrying value , there is an impairment.
PV value of the net cash inflow at 12% discount for 8 years = 521,602
Impairment loss = $375,198
At December 21.2019
2.) Debit impairment loss - $375,198
Credit equipment - $375,198
