NWC Company manufactures miniature circuit boards used in smartphones. On June 5, 2020, NWC purchased a circuit board stamping machine at a retail price of $24,000. NWC paid 5% sales tax on this purchase and hired a contractor to build a specially wired platform for the machine for $1,800, to meet OSHA safety requirements. NWC estimates the machine will have a 5-year useful life, with a salvage value of $2,000 at the end of 5 years. NWC uses straight-line depreciation and employs the "half-year" convention in accounting for partial- year depreciation. NWC's fiscal year ends on December 31. Instructions a. At what amount should NWC record the acquisition cost of the machine? b. How much depreciation expense should NWC record in 2020 and in 2021? c. At what amount will the machine be reported in NWC's balance sheet at December 31, 2021? d. During 2022, NWC's circuit board business is experiencing significant competition from companies with more advanced low-heat circuit boards. As a result, at June 30, 2022, NWC conducts an impairment evaluation of the stamping machine purchased in 2020. NWC determines that undiscounted future cash flows for the machine are estimated to be $15,200 and the fair value of the machine, based on prices in the re-sale market, to be $13,400. Prepare the journal entry to record an impairment, if any, on the stamping machine.

1a) 25800

2a) 2020 -2380

2b) 2021 - 4760

3c) 18660

4) Dr: Impairment Loss 1080

Cr: ----------------Machinery 1080

Step-by-step explanation

According to IFRS 15, property, plant and equipment should be capitalized at purchase price, including import dities amd nonrefundable purchase taxes and any directly attributable costs of bringing the asset into its working conditions for intended use.

Thus the machine should be capitalized at (24000+1800) 25800.

The cost to install platform necessary for safety requirements is capitalized since without abiding by these requirements, the company would not be able to operate.

2. The annual straight line depreciation is computed as: (cost - salvage value)/ useful life. However, it is the policy of the company to depreciate PPE added within the year 'half'. Thus for 2020, annual depreciation is divided by 2.

Annual dep= (25800 -2000)/ 5yrs

Annual dep = 4760

2020 = 2380

2021 = 4760

3. The carrying amount of PPE is the amount at which it is recorded in the financial statement (books). It is computed as:

(Cost - Accumulated Depreciation- accumulated impairment)

Accumulated depreciation is the sum of all the depreciation expense related to the asset.

At 2022 therefore, the machine should be recorded in the books for (25800- (4760×*1.5)) = 18660

^{*it stands for the number of years the machine has been depreciated, half year for 2020 and a whole year for 2021. This is multiplied by thw annual dep'n of 4760.}

4. An asset is subject to impairment when the carrying amount exceeded its recoverable amount. Recoverable amount is higher between value in use of the docounted cash flows vs fair value less cost of disposal.

At end of 2022 the carrying amoint (CA) of machine is (25800 - (4760 × *2)) 16280. While the recoverable amt (RA) is (higher of 15200 vs 13400) 15200.

^{*half year for 2020 whole year for 2021 and another half year for 2022(june)}

Thus the excess of CA (16280) over RA (15200) is 1080.

It is recorded as:

Dr: Impairment Loss 1080

Cr: ----------------Machinery 1080