A&E Corp. acquired a new high-tech printing press on 1st January, 2010, for $90,000. At that time, the company evaluated the press would have a six-year life and salvage value of $6,000. The company uses the straight-line depreciation method for all its equipment.
In 2011 December, a newer high-tech printing press is introduced in the market. The company controller is concerned that value of the press may be impaired.
The controller has provided you with the subsequent data as of December 2011 and asked you to evaluate if there is any impairment using US GAAP or IFRS. If there is any impairment, please give the journal entries.
Additionally, as part of the 2012 budget process, the controller has asked you to determine depreciation expense of the press using both US GAAP and IFRS.
• Scrap value could be reduced to $4,000.
• Expected future undiscounted cash flows from operating press are $51,000.
• Discounted net present value of expected cash flows from press is $49,000.
• Fair value of the press at 31st December, 2011, is $45,000 and selling costs are minimal.