Impairment

Blue Springs Company uses special manufacturing equipment in its widgets business. The equipment was purchased in January 2017 for $4,235,000 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 Blue Springs's equipment. Blue Springs's controller estimates that expected future net cash flows on the equipment will be $2,125,000 and that the fair value of the equipment is $1,410,000. Blue Springs intends to continue using the equipment, but it is estimated that the remaining useful life is 3 years. Blue Springs uses straight-line depreciation. Instructions (a) What is the carrying value of the equipment at December 31, 2020? (b) Prepare the journal entry (if any) to record the impairment at December 31, 2020. (c) Prepare any journal entries for the equipment at December 31, 2021. (d) Repeat the requirements for (a) and (b), assuming that Blue Springs intends to dispose of the equipment and that it has not been disposed of as of December 31, 2021. The fair value of the equipment at December 31, 2021, is estimated to be $1,350,000