Your Questions About An Impaired Asset

November 27, 2012

John asks…

Accounting Adjustments?

How would i make adjustments to these if any, i just need help with what accounts to use really, any help would be appreciated

1) the compant wrote off an A/R for 1000

2) At the end of the year the manager estimates that bad debts expense will be 2% of credit sales revenue, while the administrator estimates that 7% of the balance in A/R will prove to be uncollectable. Credir sales are 75% of all sales

3) The company made only the following two (2) merchandise purchases during the year: 1000 units @ 25,000 and 2000 @ 64,830
A total of 2,500 units were sold during the year, at an average selling price per unit of $73.35 (rounded to the nearest cent).

4) The Capital Assets were purchased on January 1, and the company estimates that they will have a useful life of 6 years or150,000machine hours with a residual value of $3,000 The company is trying to decide between amortizing it on a straight-line basis or a units-of-activity basis (I.e., using the “production” method). During 2008, the Assets were used for 15,000hours during the year.

5) The company registered its trademark at the beginning of the year, and management believes that it is increasing in value as it becomes more widely known to the public. However, some of the members of the Board of Directors think that actions taken by competitors during the year have impaired the value of the company’s trademark by about 60%

6) The company sells its products with a one-year warranty. Estimates of the costs which will be incurred under the warranty vary from 2%to 6% of the Sales revenue. There have not yet been any claims under the warranty.

admin answers:

It is not clear what exactly you want. However, here goes:

1 Debit Bad debts expense and credit A/R 1000
2. In the absence of figures for sales and accounts receivable, I would suggest you work out both the figures and determine which amount is more prudent, the use that method
3 Calculate average purchase price for valuation of inventory. The balce will be cost of goods sold to get profit
4. Deciding a depreciation method is a subjective matter. Use the one that can be more realistically estimated.
5. Revaluation of an intangible asset needs to be assessed from the point of view of future cash flows expected to be received from the trade mark. You need to analyze the nature of the action taken by competitors and how it affects the trademark. Choose the one with prudence
6. Since no previous experience exists, there is np constructive obligation to meet warranty costs and therefore it is not necessary to make any provision or create a liability

David asks…

acounting help Balance sheet?

Van den Brand Inc. is a leading global provider of specialized transportation and logistics services.

The following is stated in the 2007 Annual Report. In December of 2007 we reviewed our long-lived assets. We
decided to take a highly specialized truck out of order and as a result of this we conducted an impairment evaluation, which resulted in the following:

December 31 2006
Cost of PPE25860
Accumulated Depreciation10987

December 31 2007
Cost of PPE26600
Accumulated Depreciation12470
Capital Expenditures1985
Depreciation Expense1785
Cost of PPE sold332
Accumulated Depreciation on PPE sold 302
Cash Received for PPE sold123

Based on the preceding information, compute the amount of property, plant and equipment (both cost and accumulated depreciation) that Van den Brand Inc. wrote off as impaired during the year.

admin answers:

Isnt this your accounting homework?! As well is that all the information you where give?!

William asks…

Living in the shadow of the ex wife?

My boyfriend got a divorce 2 years ago after 5 years of separation. He went through a lot of marriage counseling during that time to no avail. His wife however did not want a divorce and she tried dragging it out as long as she could by demanding an exorbitant divorce settlement. Finally, he had to sign off more than half of his assets for his freedom. After the divorce, his ex wife still sends him notes signed with a heart. They have a mentally impaired 27-year old daughter that requires parental supervision. So my boyfriend is still in frequent contact with his ex wife over the daughter’s affairs. He feels guilt often about leaving his emotionally unstable ex wife behind and is therefore protective of her feelings. He does not want her to know too much about our relationship, fearing that she might “tip over”. I know he is not in love with her anymore. But he does not seem to be able to clear himself of the relationship. What should I do?
Thanks for your advice.

admin answers:

If he has a mentally disabled child with this woman, he many never completely “clear” himself of the relationship. I think you are just going to have to take him how he is.

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