Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Sheffield Company uses special strapping equipment in its packaging business. The equipment was purchased in January 2019 for $9,900,000 and had an estimated useful life

Sheffield Company uses special strapping equipment in its packaging business. The equipment was purchased in January 2019 for $9,900,000 and had an estimated useful life of 8 years with no salvage value. At December 31, 2020, new technology was introduced that would accelerate the obsolescence of Sheffields equipment. Sheffields controller estimates that expected future net cash flows on the equipment will be $6,187,500 and that the fair value of the equipment is $5,445,000. Sheffield intends to continue using the equipment, but it is estimated that the remaining useful life is 4 years. Sheffield uses straight-line depreciation.

(a)

Your answer has been saved. See score details after the due date.

What is the carrying value of the equipment at December 31, 2020?

Carrying value $ 7425000

(b)

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

Account Titles and Explanation

Debit

Credit

Dec. 31 loss on impairment 1980000
accum. depreciaiton 1980000

(c)

Prepare any journal entries for the equipment at December 31, 2021. The fair value of the equipment at December 31, 2021, is estimated to be $5,692,500. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

Date

Account Titles and Explanation

Debit

Credit

Dec. 31

Repeat the requirements for (a) and (b), assuming that Sheffield Company intends to dispose of the equipment and that it has not been disposed of as of December 31, 2022.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Financial Accounting

Authors: C. William Thomas, Wendy M Tietz

13th Edition

013689903X, 9780136899037

More Books

Students also viewed these Accounting questions

Question

=+d. Is there another print vehicle you would suggest?

Answered: 1 week ago