Question

Equipment has a book value of $16,000 and a fair value of $14,750. The decline in value meets the impairment test. Prepare the entry to record this $1,250 impairment.

Answer 1

The entry to record the $1,250 impairment includes a Debit to Impairment loss and Credit to Accumulated Impairment Loss.

Impairment Loss = Book Value - Fair Value

Impairment Loss = $16,000 - $14,750

Impairment Loss = $1,250

Account Titles                                     Debit    Credit

Impairment Loss                                 $1,250

  Accumulated Impairment Loss                     $1,250

(To record impairment loss on equipment)  

In conclusion, the entry to record the $1,250 impairment includes a Debit to Impairment loss and Credit to Accumulated Impairment Loss.

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