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Pierre's Pet Shop Limited bought new grooming equipment on January 1, 2012 for $13,000. The useful life is estimated to be 3 years with a residual value of $1,000. The company uses straight-line depreciation. On January 1, 2013, Pierre determined that the value of the equipment is impaired, as its recoverable amount is expected to be $4,800.
-The carrying amount of the equipment after the journal entry for impairment is recorded is
A)$4,200.
B)$4,800.
C)$5,200.
D)$9,000.

Question

Use the following information for questions 
Pierre's Pet Shop Limited bought new grooming equipment on January 1, 2012 for $13,000. The useful life is estimated to be 3 years with a residual value of $1,000. The company uses straight-line depreciation. On January 1, 2013, Pierre determined that the value of the equipment is impaired, as its recoverable amount is expected to be $4,800.
-The carrying amount of the equipment after the journal entry for impairment is recorded is
A)$4,200.
B)$4,800.
C)$5,200.
D)$9,000.

Quizplus · Accepted Answer

The carrying amount of the equipment before the impairment is ($13,000 - $1,000) / 3 = $4,000. Since the recoverable amount of the equipment is $4,800, which is greater than the carrying amount, the equipment is not written down. Therefore, the carrying amount after the impairment is still $4,000, resulting in answer B.

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