Prepare the journal entry to record the impairment

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Reference no: EM132753319

Question - Bright Company uses special equipment in its business. The equipment was purchased in January 2014 for $10 000 000 and had an estimated useful life of 10 years with a salvage value of $150 000. At December 31, 2016, new technology was introduced that would accelerate the obsolescence of the equipment. It is estimated as expected future net cash flows on the equipment will be $6 750 000 and that the fair value of the equipment is $6 300 000. Bright Company intends to continue using the equipment, but it is estimated that the remaining useful life is 4 years with no salvage value. Gold Company uses straight-line depreciation.

Instructions -

1. Prepare the journal entry (if any) to record the impairment at 31 December, 2016?

2. Prepare the journal entry for depreciation of the equipment at 31 December, 2017?

3. The fair value of the equipment at 31 December, 2017, is estimated to be $5 062 500. Prepare the journal entry if any required.

Reference no: EM132753319

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