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Simon Company paid cash to purchase new equipment for warehouse on 1 January 2020 at an invoice price of $72,000. It also paid $2,000 for freight on the equipment and $3,000 for training cost to familiarize the warehouse staff for the use of the equipment. The law requires that Simon Company must receive a certificate of testing which shows the equipment is safe for use before Simon Company could use the equipment Simon Company paid $1,300 for the testing. The certificate of testing shows that the equipment is safe for use. The equipment was estimated to have a residual value of $3,300. Useful life is 5 years. The company calculate depreciation using the double-declining method. On 31 December 2020, the management performed the impairment test for the equipment. The estimated future cash flow for the use of the equipment is $30,000. The fair value of the equipment is $25,000. Required: 1. Prepare journal entries to record the transactions/events in 2020. Narrations are not required. Show your calculations and steps to determine whether there is impairment loss and calculate the amount of the loss if any (80 marks). 2. A junior accountant has difficulties in determining whether Simon Company should use the straight- line method or double declining method. Explain to the accountant under what circumstances the straight-line method and double-declining method should be used. (20 marks)

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