Chapter 3
Long-Term Assets
135
Analysis
If the total estimated barrels of oil extracted changes during the life of the natural resources, is
it still suitable to use units-of-production method? Explain why.
AP-22B (
3
4
)
AIT Company is a well-known producer of activeware including sports shirts and fleeces.
On April 2, 2015, AIT Company bought an item of machinery for $120,000 with an expected
useful life of 10 years and residual value of zero. AIT Company uses straight-line depreciation
and its year-end is December 31. The impairment test was done on December 31, 2018, after
taking into account the depreciation expense for the year. After conducting an impairment
test on its machinery, AIT realized that the asset has been impaired by $5,000.
Required
a) Record the journal entry for the impairment loss.
Date
Account Title and Explanation
Debit
Credit
