Reference no: EM132608702

Rhino Corporation is a manufacturer of automobile parts. Its capital assets include specialized equipment that is being used in the finishing stage of its manufacturing process.

• The equipment was purchased in 2017 and is being depreciated using the units of production method.
• By December 31, 2018, the book (carrying) value was $430,000 (after depreciation expense had been recorded).
• However, at that time, Rhino became aware of new technology that would make the equipment obsolete within the next five years.
• An appraisal puts the equipment's future undiscounted net cash flows at $390,000 and its fair value at $300,000. While considering its options for the eventual replacement, Rhino will continue using the equipment, but will change to straight-line depreciation for the remaining useful life of 5 years.

Instructions (show all calculations)

Assuming Rhino is a private Canadian corporation,

Question a) Prepare the journal entry, if any, to record the impairment loss at December 31, 2018.

Question b) Prepare the journal entries to record 2019 depreciation