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Accounting for impairment

Problem is in Chapter 11 of Depreciation, Impairments and Depletion Intermediate Accounting Kieso, Weygandt, & Warfield E11-18 Petro Garcia, Inc.

(Impairment) The management of Petro Garcia Inc. was discussing whether certain equipment should be written off as a charge to current operations because of obsolescence. This equipment has a cost of $900,000 with depreciation to date of $400,000 as of December 31, 2007. On December 31, 2007, management projected its future net cash flows from this equipment to be $300,000 and its fair value to be $230,000. The company intends to use this equipment in the future. Instructions:

Prepare the journal entry to record the impairment at 12/31/07.
Where should the gain or loss (if any) should be reported in the income statement?
At 12/31/08, the equipment's fair value increased to $260,000. Prepare the journal entry (if any) to record this increase at fair value.
What accounting issues did management face in accounting for impairment?

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(Impairment) The management of Petro Garcia Inc. was discussing whether certain equipment should be written off as a charge to current operations because of obsolescence. This equipment has a cost of $900,000 with depreciation to date of $400,000 as of December 31, 2007. On December 31, 2007, management projected its future net cash flows from this equipment to be $300,000 and its fair value to be $230,000. The company intends to use this equipment ...

Solution Summary

The solution explains the accounting for impairment

$2.19