Sheridan Company uses special strapping equipment in itspackaging business. The equipment was purchased in January 2016 for$10,500,000 and had an estimated useful life of 8 years with nosalvage value. At December 31, 2017, new technology was introducedthat would accelerate the obsolescence of Sheridanâs equipment.Sheridanâs controller estimates that expected future net cash flowson the equipment will be $6,615,000 and that the fair value of theequipment is $5,880,000. Sheridan intends to continue using theequipment, but it is estimated that the remaining useful life is 4years. Sheridan uses straight-line depreciation.
1. Prepare the journal entry (if any) to record the impairmentat December 31, 2017.
2. Prepare the journal entry for the equipment at December 31,2018. The fair value of the equipment at December 31, 2018, isestimated to be $6,195,000.
3. Prepare the journal entry (if any) to record the impairmentat December 31, 2017 and for the equipment at December 31, 2018,assuming that Sheridan intends to dispose of the equipment and thatit has not been disposed of as of December 31, 2018.
Sheridan Company uses special strapping equipment in itspackaging business. The equipment was purchased in January 2016 for$10,500,000 and had an estimated useful life of 8 years with nosalvage value. At December 31, 2017, new technology was introducedthat would accelerate the obsolescence of Sheridanâs equipment.Sheridanâs controller estimates that expected future net cash flowson the equipment will be $6,615,000 and that the fair value of theequipment is $5,880,000. Sheridan intends to continue using theequipment, but it is estimated that the remaining useful life is 4years. Sheridan uses straight-line depreciation.
1. Prepare the journal entry (if any) to record the impairmentat December 31, 2017.
2. Prepare the journal entry for the equipment at December 31,2018. The fair value of the equipment at December 31, 2018, isestimated to be $6,195,000.
3. Prepare the journal entry (if any) to record the impairmentat December 31, 2017 and for the equipment at December 31, 2018,assuming that Sheridan intends to dispose of the equipment and thatit has not been disposed of as of December 31, 2018.
