Harrison Company Is Located in Taiwan and Uses International Accounting

Essay

Harrison Company is located in Taiwan and uses international accounting standards.Harrison Company purchased equipment 8 years ago for $1,000,000.The equipment has been depreciated using the straight-line method with a 20-year useful life and 10% residual value.Harrison's operations have experienced significant losses for the past 2 years and,as a result,the company has decided that the equipment should be evaluated for possible impairment.The management of Harrison Company estimates that the equipment has a remaining useful life of 7 years.The discounted value of the future net cash inflows from the use of the equipment is $220,000.The fair value of the equipment is $240,000.No goodwill was associated with the purchase of the equipment.Harrison Company has chosen to recognize increases in the value of long-term operating assets in accordance with the allowable alternative under IAS 36.
(1)Determine if an impairment loss should be recognized.
(2)Determine the amount of the loss and prepare the journal entry to record the loss.
(3)What journal entry should Harrison Company make if the fair value of the equipment was $980,000?