Problem 11-9 Sarasota Company uses special strapping equipment in its packaging
ID: 2561112 • Letter: P
Question
Problem 11-9 Sarasota Company uses special strapping equipment in its packaging business. The equipment was purchased in January 2016 for $12,100,000 and had an estimated useful life of 8 years with no salvage value. At December 31, 2017, new technology was introduced that would accelerate the obsolescence of Sarasota's equipment. Sarasota's controller estimates that expected future net cash flows on the equipment will be $7,623,000 and that the fair value of the equipment is $6,776,000. Sarasota intends to continue using the equipment, but it is estimated that the remaining useful life is 4 years. Sarasota uses straight-line depreciation. Your answer is partially correct. Try again repare the journal entry for the equipment at December 31, 2018. The fair value of the equipment at December 31, 2018, is estimated to be $7,139,000. (If no entry equired, select "No entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered dent manually.) Date Account Titles and Explanation Debit Credit ec. 31 Dapreciation Expense 1452000o Accumulated Depreciation-Equipment 1452000 Problem 11-9. Solution - Google Chrome Secure l https://edugen.wileyplus.com/edugen/shared/assignment test/qsolution.uni?itemid-res.. SHOW LIST OF ACCOUNTS SHOW SOLUTION SHOW ANSWER LINK TO TEXT Solution CLOSE Your answer is partially correct. Try again Problem 11-9 Depreciation Expense = ($6,776,000 ÷ 4) = $1,694,000 repare the journal entry (if any) to record the impairment quipment and that it has not been disposed of as of Decem redit account titles are automatically indented whenExplanation / Answer
Fair value accounting requires companies to adjust assets in a timely manner to reflect current market prices.
SFAS 157 sets guidelines for quantifying the fair value of assets based on the "selling" or "exit" price of assets in active markets. Where active markets don't exist, SFAS 157 allows companies to make their own assumptions using specific FASB guidelines.
So in above case, as fair value is less than Book value, company should consider the market price rather Book valu