Azmy Company uses special strapping equipment in its packaging business. The equipment was purchased on January 1, 2020 for $6,000,000 and had an estimated useful life of 8 years with no salvage value. Azmy properly depreciates the equipment using straight-lie depreciation for 2020 and 2021. On December 31, 2021, new technology was introduced that would accelerate the obsolescence of Azmy's equipment. Azmy's controller estimates that sum of undiscounted expected future net cash flows on the equipment will be $3.750,000 and that the fair value of the equipment is $3,300,000. Azmy intends to continue using the equipment, but it is estimated that the remaining useful life is 4 years. Po ofe.00 P qutm Nat e a d Instructions (a) Show your calculation of any possible impairment on December 31, 2021. Prepare the journal entry to record the impairment if there is any. (b) Prepare any necessary journal entry for the equipment on December 31, 2022. The fair value of the equipment on December 31, 2022 is estimated to be $3,450,000.

Azmy Company uses special strapping equipment in its packaging business. The equipment was purchased on January 1, 2020 for $6,000,000 and had an estimated useful life of 8 years with no salvage value. Azmy properly depreciates the equipment using straight-lie depreciation for 2020 and 2021. On December 31, 2021, new technology was introduced that would accelerate the obsolescence of Azmy's equipment. Azmy's controller estimates that sum of undiscounted expected future net cash flows on the equipment will be $3.750,000 and that the fair value of the equipment is $3,300,000. Azmy intends to continue using the equipment, but it is estimated that the remaining useful life is 4 years. Po ofe.00 P qutm Nat e a d Instructions (a) Show your calculation of any possible impairment on December 31, 2021. Prepare the journal entry to record the impairment if there is any. (b) Prepare any necessary journal entry for the equipment on December 31, 2022. The fair value of the equipment on December 31, 2022 is estimated to be $3,450,000.

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FINANCIAL ACCOUNTING

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Chapter1: Financial Statements And Business Decisions

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Concept explainers

Depreciation Methods

The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.

Depreciation Accounting

In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.

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Question

000
Azmy Company uses special strapping equipment in its packaging business. The equipment
was purchased on January 1, 2020 for $6,000,000 and had an estimated useful life of 8
years with no salvage value. Azmy properly depreciates the equipment using straight-line
depreciation for 2020 and 2021. On December 31, 2021, new technology was introduced
that would accelerate the obsolescence of Azmy's equipment. Azmy's controller estimates
that sum of undiscounted expected future net cash flows on the equipment will be
$3.750,000 and that the fair value of the equipment is $3,300,000. Azmy intends to
continue using the equipment, but it is estimated that the remaining useful life is 4 years.
PPg qumtion
Not er awd
Pls ur ofe.00
Instructions
(a) Show your calculation of any possible impairment on December 31, 2021. Prepare the
journal entry to record the impairment if there is
any.
(b) Prepare any necessary journal entry for the equipment on December 31, 2022. The fair
value of the equipment on December 31, 2022 is estimated to be $3,450,000.
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