RolandCompany uses special strapping equipment in its packaging business. The equipmentwas purchased in January 2011 for $10,100,000 and had an estimateduseful life of 8 years with no salvage value. At December 31, 2012,new technology was introduced that would accelerate theobsolescence of Roland's equipment. Roland's controller estimatesthat expected future net cash flows on the equipment will be$6,300,000 and that the fair value of the equipment is $5,600,000.Roland intends to continue using the equipment, but it is estimatedthat the remaining useful life is 4 years. Roland usesstraight-line depreciation. (a) Prepare the journal entry (if any)to record the impairment at December 31, 2012. (b) Prepare thejournal entry for the equipment at December 31, 2013. The fairvalue of the equipment at December 31, 2013, is estimated to be$5,900,000.(c) repeat the requirements for (a) and (b), assumingthat Roland intends to dispose of the equipment and that it has notbeen disposed of as of December 31, 2013.
RolandCompany uses special strapping equipment in its packaging business. The equipmentwas purchased in January 2011 for $10,100,000 and had an estimateduseful life of 8 years with no salvage value. At December 31, 2012,new technology was introduced that would accelerate theobsolescence of Roland's equipment. Roland's controller estimatesthat expected future net cash flows on the equipment will be$6,300,000 and that the fair value of the equipment is $5,600,000.Roland intends to continue using the equipment, but it is estimatedthat the remaining useful life is 4 years. Roland usesstraight-line depreciation. (a) Prepare the journal entry (if any)to record the impairment at December 31, 2012. (b) Prepare thejournal entry for the equipment at December 31, 2013. The fairvalue of the equipment at December 31, 2013, is estimated to be$5,900,000.(c) repeat the requirements for (a) and (b), assumingthat Roland intends to dispose of the equipment and that it has notbeen disposed of as of December 31, 2013.
