Problem 11-09 (Part Level Submission)

OrioleCompany uses special strapping equipment in its packaging business. The equipment was purchased in January 2019 for $12,000,000and had an estimated useful life of8years with no salvage value. At December 31, 2020, new technology was introduced that would accelerate the obsolescence of Oriole's equipment. Oriole's controller estimates that expected future net cash flows on the equipment will be $7,560,000and that the fair value of the equipment is $6,720,000. Oriole intends to continue using the equipment, but it is estimated that the remaining useful life is4years. Oriole uses straight-line depreciation.

(a)

Your answer is correct.

Prepare the journal entry (if any) to record the impairment at December 31, 2020.(If no entry is required, select "No entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

DateAccount Titles and Explanation

Debit

Credit

Dec. 31

SHOW LIST OF ACCOUNTS

SHOW SOLUTION

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Attempts: 3 of 5 used

(b)

Prepare required journal entries (if any) at December 31, 2021. The fair value of the equipment at December 31, 2021, is estimated to be $7,080,000.(If no entry is required, select "No entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

DateAccount Titles and Explanation

Debit

Credit

Dec. 31