Lackey Painting Company determines that a printing press used in its operations has suffered a permanent impairment in value because of technological changes. An entry to record the impairment should

Group of answer choices

include a credit to the equipment account.

recognize an unusual loss for the period.

include a credit to the equipment accumulated depreciation account.

not be made if the equipment is still being used.

Answer:

Impairement will arise when carrying amount of an asset is reduced below recoverable amount.

Recoverable amount in simple terms is that you can recover the cost of the asset either by using it or by selling it.

Hence,accounting standard also provides same criteria.

Recoverable amount is higher of below:

1.Fair less cost to sell ,

2.Present value of future cashflows expected to derive from an asset.

Therefore,if an entity's carrying value of an asset is reduced below this value ,it should recognise impairment loss by reducing carrying value of asset and by debiting P&L.

In the given case,P&L should be debited as impairment loss and credit should be given to accumulated impairment loss account (which should be adjusted against cost of the asset in presentation of financial statements).

Impairment loss is to be recognised even when the asset is being used.