QUESTION:

MNO Ltd. has an asset that it believes may be impaired. The carrying value of the asset is $1,000,000, and the recoverable amount of the asset is estimated to be $900,000.

ANSWER:

The journal entry to record the impairment loss is:

DR. Impairment loss (expense) $100,000 CR. Asset (reduction in carrying value) $100,000

Here's the tabulated working calculation for the journal entry to record the impairment loss:

To record the impairment loss, we need to debit the impairment loss account for the amount of the impairment loss (carrying value of $1,000,000 less the recoverable amount of $900,000), and credit the asset account for the same amount. The journal entry would be:

Debit impairment loss (expense) for $100,000

Credit asset (reduction in carrying value) for $100,000

Therefore, the journal entry to record the impairment loss would be:

Impairment loss (expense) - $100,000

Asset (reduction in carrying value) - $100,000