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Novak Company uses special strapping equipment in its packaging business. The equipment was purchased in January $2024$ for

$$12,500,000$ and had an estimated useful life of $8$ years with no salvage value. At December $31,2025,$ new technology was

introduced that would accelerate the obsolescence of Novak's equipment. Novak'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.$ Novak intends to continue using

the equipment, but it is estimated that the remaining useful life is $4$ years. Novak uses straight$-$line depreciation.

$($a$)$

Correct Answer

$6$ Your answer is partially correct.

Prepare the journal entry $($if any$)$ to record the impairment at December $31,2025.($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. List debit entry before credit entry.$)$

Date Account Titles and Explanation

Debit

Credit

Dec.

Loss on Impairment

$31$

Accumulated Depreciation $-$ Equipment

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List of Accounts