Answer:
The question is missing cash flows receivable from the asset from year onward,that is found below:
A company acquired a new high-tech printing press on January 1, 2011, for $90,000. At that time, the company estimated the press would have a six-year life and salvage value of $6,000. The company uses the straight-line depreciation method for all its equipment. In December 2012, a newer high-tech printing press is introduced in the market. The company controller is concerned that the value of the press may be impaired. The controller has provided you with the following data as of December 2012 and asked you to determine if there is any impairment using US GAAP or IFRS. If there is any impairment, please provide the journal entries. Additionally, as part of the 2013 budget process, the controller has asked you to calculate depreciation expense of the press using both US GAAP and IFRS. ? Scrap value should be reduced to $4,000. ? Expected future undiscounted cash flows from operating the press are $51,000. Discounted net present value of expected cash flows from the press is $49,000. ? Fair value of the press at December 31, 2012, is $45,000 and selling costs are minimal.
The printing press has been impaired has been impaired by $17000 using US GAAP.
The journal entries
Dr Impairment loss account $17000
Cr Printing press account $17000
The depreciation for 2013 under both IFRS and US.GAAP is calculated as :
Book value -impairment/4years
=($62000-$17000)/4
=$11250
Explanation:
An asset is impaired according to US GAAP if the book value is greater cash flows from the asset. The impairment is calculated thus:
=$90000-($90000-$6000)/6years *2years
=$90000-$28000
=$62000 book value
undiscounted cash flow =$51000
Since $62000 is greater than $51000
The printing press is impaired
Impairment=book value -fair value
Fair value =$45000
Hence impairment=$62000-$45000
Impairment =$17000
