Yernar uses special plastic wrapping equipment in its shipping business. The equipment was purchased in January 2021 for 4,000,000 and had an estimated useful life of 8 years with no salvage value. On December 31, 2022, new technology was introduced that would accelerate the obsolescence of Yernars equipment. Yernars controller estimates that the value-in-use of the equipment will be 2,800,000 and that the fair value less costs to sell of the equipment is 2,400,000. Yernar intends to continue using the equipment, but it is estimated that the remaining useful life is 4 years. Yernar uses straight-line depreciation.

Instructions

(a) Prepare the journal entry (if any) to record the impairment at December 31, 2022.

(b) Prepare any journal entries for the equipment on December 31, 2023. The fair value of the equipment on December 31, 2023, is estimated to be 2,900,000.

(c) Repeat the requirement for (b), assuming that Yernar intends to dispose of the equipment and that it has not been disposed of as of December 31, 2023. NRV and the value-in-use is 2,400,000 at December 31, 2022, and 2,900,000 at December 31, 2023.