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Nicholas Company uses special strapping equipment in its packaging business. The equipment was purchased in January 2023 for $6,000,000 and had an estimated useful life of 8 years with no residual value. On December 31, 2024, (after depreciation expense was recorded for the year), new technology was introduced that would accelerate the obsolescence of Nicholas' equipment. Nicholas' controller estimates that 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. Nicholas intends to continue using the equipment, but it is estimates that the remaining useful life is 3 years. Nicholas uses the straight-line method of depreciation. (A) Prepare the journal entry (if necessary) to record the impairment at December 31, 2024. (B) Prepare any journal entries for the equipment on December 31, 2025. The fair value of the equipment on December 31, 2025 is estimated to be $3,450,000.

Nicholas Company uses special strapping equipment in its packaging business. The equipment was purchased in January 2023 for $6,000,000 and had an estimated useful life of 8 years with no residual value. On December 31, 2024, (after depreciation expense was recorded for the year), new technology was introduced that would accelerate the obsolescence of Nicholas' equipment. Nicholas' controller estimates that 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. Nicholas intends to continue using the equipment, but it is estimates that the remaining useful life is 3 years. Nicholas uses the straight-line method of depreciation. (A) Prepare the journal entry (if necessary) to record the impairment at December 31, 2024. (B) Prepare any journal entries for the equipment on December 31, 2025. The fair value of the equipment on December 31, 2025 is estimated to be $3,450,000.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Nicholas Company uses special strapping equipment in its packaging business. The equipment was purchased in January 2023 for $6,000,000 and had an estimated useful life of 8 years with no residual value. On December 31, 2024, (after depreciation expense was recorded for the year), new technology was introduced that would accelerate the obsolescence of Nicholas' equipment. Nicholas' controller estimates that 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. Nicholas intends to continue using the equipment, but it is estimates that the remaining useful life is 3 years. Nicholas uses the straight-line method of depreciation. (A) Prepare the journal entry (if necessary) to record the impairment at December 31, 2024. (B) Prepare any journal entries for the equipment on December 31, 2025. The fair value of the equipment on December 31, 2025 is estimated to be $3,450,000.
Transcribed Image Text:Nicholas Company uses special strapping equipment in its packaging business. The equipment was purchased in January 2023 for $6,000,000 and had an estimated useful life of 8 years with no residual value. On December 31, 2024, (after depreciation expense was recorded for the year), new technology was introduced that would accelerate the obsolescence of Nicholas' equipment. Nicholas' controller estimates that 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. Nicholas intends to continue using the equipment, but it is estimates that the remaining useful life is 3 years. Nicholas uses the straight-line method of depreciation. (A) Prepare the journal entry (if necessary) to record the impairment at December 31, 2024. (B) Prepare any journal entries for the equipment on December 31, 2025. The fair value of the equipment on December 31, 2025 is estimated to be $3,450,000.
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