Reference no: EM133136995
Question - CSD Company uses special forming equipment in its manufacturing business. The equipment was purchased in January 2018 for $6,000,000 and had an estimated useful life of 10 years with no salvage value. At December 31, 2020, new technology was introduced that would accelerate the obsolescence of CD's equipment. CSD's controller estimates that expected future net cash flows on the equipment will be $4,000,000 and that the fair value of the equipment is $3,300,000. As of December 31, 2020, CD intends to continue using the equipment, but it is estimated that the remaining useful life is 4 years. CSD uses the straight-line depreciation method.
(a) Does this asset need to get impaired? If so, why?
(b) Show the journal entry (if any) to record the impairment at December 31, 2020.
(c) Show any journal entry (if any) for the equipment at December 31, 2021.
(d) Assuming that CSD intends to use the equipment, show any journal entries for the equipment at Dec 31, 2021. The fair value of the equipment at Dec 31, 2021, is estimated to be $3,700,000. Show any journal entry (if any) for the equipment at December 31. 2021.
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