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Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281

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Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281
Textbook Problem
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Steel Magnolia Incorporated purchased a trademark 7 years ago for $275,000. Steel Magnolia believed the trade-mark would have an indefinite life. At the end of 2020, the corporation believes the fair value of the trademark is $189,000. Record the impairment loss for Steel Magnolia.

To determine

Prepare journal entry to record the impairment loss of Company S.

Explanation

Impairment loss of assets:

Impairment loss of assets arises when the carrying value of the assets recorded on the balance sheet of the company exceeds its fair market value.

Prepare journal entry to record the impairment loss as follows:

DateAccounts Title and ExplanationDebit ($)Credit ($)
 Impairment Loss 86,000 
        Trademark 86,000
 (To record the impairment loss)  

Table (1)

  • Impairment loss is an expense account, and it decreases the value of equity...

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