Problem 11-9 Bonita Company uses special strapping equipment in its packaging bu
ID: 2583833 • Letter: P
Question
Problem 11-9 Bonita Company uses special strapping equipment in its packaging business. The equipment was purchased in January 2016 for $12,500,000 and had an estimated use life of 8 years with no salvage value. At December 31, 2017, new technology was introduced that would accelerate the obsolescence of Bonita's equipment. Bonita's controller estimates that expected future net cash flows on the equipment will be $7,875,000 and that the fair value of the equipment is $7,000,000. Bonita intends to continue using the equipment, but it is estimated that the remaining useful life is 4 years. Bonita uses straight-line depreciation. Your answer is partially correct. Try again Prepare the journal entry (if any) to record the impairment at December 31, 2017. (If no entry is required, select "No entry" for the account titles and enter o for the amounts. Credit account titles are automatically indented whe amont is entered. Do not indent manually) Date Account Titles and Explanation Debit Credit Dec. 31 Loss on Impairment 550000 Accumulated Equipment 5500000Explanation / Answer
1.Loss on Impairment..........Dr $39,37,500
To Accumulated Depreciation-Equipment. $39,37,500
(Book Value of Asset on 31/12/2017-Cost-Accumulated Depreciation)
(Book Value of Asset on 31/12/2017=125,00,000$-(125,00,000$/8Yrs)=109,37,500$
Impairment Loss=Book Value - Recoverable Amt
Impairment Loss=109,37,500$-70,00,000$=$39,37,500
2.For 31/12/2018 Only Depreciation Entry:
1.Depreciation Expense A/c............Dr $17,50,000
Accumulated Depreciation-Equipment. $17,50,000