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Dexter Company uses special strapping equipment in its packagingbusiness. The equipment was purchased in January 2011 for$8,000,000 and had an estimated useful life of 8 years with nosalvage value. At December 31, 2012, new technology was introducedthat would accelerate the obsolescence of Dexter’s equipment.Dexter’s controller estimates that expected future net cash flowson the equipment will be $5,000,000 and that the fair value of theequipment is $4,400,000. Dexter intends to continue using theequipment, but it is estimated that the remaining useful life is 4years. Dexter uses straight-line depreciation.

Instructions

(a) Prepare the journal entry (ifany) to record the impairment at December 31, 2012.

(b) Prepare the journal entries forthe equipment at December 31, 2013. The fair value of the equipmentat December 31, 2013, is estimated to be $4,600,000.

(c) Repeat therequirements for (a) and (b), assuming that Roland intends todispose of the equipment and that it has not been disposed of as ofDecember 31, 2013.

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Casey Durgan
Casey DurganLv2
28 Sep 2019

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