Maple Inc
Subject:AccountingPrice:2.86 Bought3
Maple Inc. owns a furniture that as of December 31, 2019, had a cost of $50,000 and accumulated depreciation of $40,000. The firm had a reason to believe that the furniture was impaired. The firm estimated the future cash flows of the furniture at $9,000 and the fair value of the furniture at $7,000.
- Does Maple Inc. need to record an impairment for this furniture? If so, show your work to explain why and provide the journal entry for the impairment.
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Yes. The CA is greater than the fair value of the furniture hence, there is a need to record impairment. Imagine, your furniture with book value of 10,000 can only be sold for 7,000 based on the fair value today. In that case, you will definitely lose 3,000.
CA (50,000-40,000) 10,000
FV 7,000
Impairment Loss 3,000
To record:
Impairment Loss 3,000
Accumulated Depreciation 3,000
