Equipment cost $fill in the blank 1 Less: Accumulated depreciation fill in the blank 2 Book value $fill in the blank 3 Undiscounted expected net cash flows $fill in the blank 4 Present value of expected net cash flow $fill in the blank 5 Impairment loss $fill in the blank 6
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On January 1, 2020 Hill Bowling purchased equipment for $3.5 million. The equipment is being
Required:
Complete the Impairment test for Hill Bowling.
| PV of $1 | .519 |
| PV of an annuity of $1 | 3.433 |
| FV of $1 | 1.925 |
| FV of an annuity of $1 | 6.610 |
| Hill Bowling Impairment Test December 31, 2024 |
|
| Equipment cost | $fill in the blank 1 |
| Less: |
fill in the blank 2 |
| Book value | $fill in the blank 3 |
| Undiscounted expected net cash flows | $fill in the blank 4 |
| Present value of expected net cash flow | $fill in the blank 5 |
| Impairment loss | $fill in the blank 6 |
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- Madison Company purchased a machine on February 1, 2018, for $200,000. On December 31, 2021, when the book value of the machine is $90,000, Madison Company checks to see if the machine is impaired. Due to recent technological advances Madison Company expects the machine to generate future cash flows of $70,000. If Madison Company estimates the current fair market value of the machine is $55,000 on December 31, 2021, what amount of impairment loss (if any) should be recorded? $20,000 O $35.000 O $60,000 O $90,000 O The asset is not impaired.On January 1, 2020 Hill Bowling purchased equipment for $3.5 million. The equipment is being depreciated by the straight-line method over 10 years with no residual value. On December 31, 2024, new advanced bowling equipment has come on the market. As a result, Hill believes the bowling equipment currently being used is going to become obsolete quicker than anticipated, so Hill wants to complete an impairment test on that equipment. Hill estimates that the net cash flows from using the current equipment will be $250,000 per year for the next five years. Hill also expects it could sell the current equipment immediately for $25,000. Hill uses a 14% discounted rate to evaluate other projects of this nature. Required:Complete the Impairment test for Hill Bowling.PV of $1 .519PV of an annuity of $1 3.433FV of $1 1.925FV of an annuity of $1 6.610Roland Company uses special strapping equipment in its packaging business. The equipment was purchased in January 2024 for $10,000,000 and had an estimated useful life of 8 years with no salvage value. On December 31, 2025, new technology was introduced that would accelerate the obsolescence of Roland’s equipment. Roland’s controller estimates that the expected future net cash flows on the equipment will be $6,300,000 and that the fair value of equipment is $5,600,000. Roland intends to continue using the equipment, but it is estimated that the remaining useful life is 4 years. Roland uses straight-line depreciation.
- Sheridan Company uses special strapping equipment in its packaging business. The equipment was purchased in January 2024 for $10,700,000 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 Sheridan's equipment. Sheridan's controller estimates that expected future net cash flows on the equipment will be $6,741,000 and that the fair value of the equipment is $5,992,000. Sheridan intends to continue using the equipment, but it is estimated that the remaining useful life is 4 years. Sheridan uses straight-line depreciation. 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 o for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually. List debit entry before credit entry.) Date Dec. 31 Account Titles and Explanation…Irwin, Inc. constructed a machine at a total cost of $35 million. Construction was completed at the end of 2017 and the machine was placed in service at the beginning of 2018. The machine was being depreciated over a 10-year life using the sum-of-the-years’-digits method. The residual value is expected to be $2 million. At the beginning of 2021, Irwin decided to change to the straight-line method. Ignoring income taxes, what journal entry(s) should Irwin record relating to the machine for 2021?On January 1, 2014, Borstad Company purchased equipment for $1,200,000. It is depreciating the equipment over 25 years using the straight-line method and a zero residual value. Late in 2019, because of technological changes in the industry and reduced selling prices for its products, Borstad believes that its equipment may be impaired and will have a remaining useful life of 8 years. Borstad estimates that the equipment will produce cash inflows of $400,000 and will incur cash outflows of $293,000 each year for the next 8 years. It is not able to determine the fair value of the equipment based on a current selling price. Borstad’s discount rate is 10%. Required: 1. Prepare schedules to determine whether, at the end of 2019, the equipment is impaired and, if so, the impairment loss to be recognized. 2. Prepare the journal entry to record the impairment. 3. Next Level How would your answer to Requirement 1 change if the discount rate was 14% and the cash flows were…
- Bob Jensen Inc. purchased a $200,000 machine to manufacture specialty taps for electrical equipment. Jensen expects to sell all it can manufacture in the next 10 years. To encourage capital investments, the government has exempted taxes on profits from new investments. This legislation is to be in effect for the foreseeable future. The machine is expected to have a 10-year useful life with no salvage value. Jensen uses straight-line depreciation. The net cash inflow is expected to be $46,000 each year for 10 years. Jensen uses a 12% discount rate in evaluating capital investments. Assume, for simplicity, that MACRS depreciation rules do not apply. Required: Using Excel (including built-in functions for NPV, IRR, and MIRR), compute the following for the above-referenced investment: 1. The payback period, under the assumption that cash inflows occur evenly throughout the year. (Do not round intermediate calculations. Round your final answer to 1 decimal place.) 2. The accounting (book)…On January 1, 2016, the Key West Company acquired a pie-making machine for $50,000. The machine was expected to have a useful life of 10 years with no residual value. Key West uses the straight-line depreciation method. On January 1, 2023, due to technological changes in the bakery industry, Key West believed that the asset might be impaired. Key West estimates the machine will generate net cash flows of $12,000 and has a current fair value of $5,040. Required: 1. What is the book value of the machine on January 1, 2023?$fill in the blank 66999d0af058066_1 2. Compute the loss related to the impairment.$fill in the blank 66999d0af058066_2 3. Prepare the journal entry necessary to record the impairment of the machine. If an amount box does not require an entry, leave it blank. Jan. 1 fill in the blank 83327604a043063_2 fill in the blank 83327604a043063_3 fill in the blank 83327604a043063_5 fill in the blank 83327604a043063_6On January 1, 2014, Borstad Company purchased equipment for $1,150,000. It is depreciating the equipment over 25 years using the straight-line method and a zero residual value. Late in 2019, because of technological changes in the industry and reduced selling prices for its products, Borstad believes that its equipment may be impaired and will have a remaining useful life of 8 years. Borstad estimates that the equipment will produce cash inflows of $390,000 and will incur cash outflows of $281,000 each year for the next 8 years. It is not able to determine the fair value of the equipment based on a current selling price. Borstad’s discount rate is 14%. Required: 1. Prepare schedules to determine whether, at the end of 2019, the equipment is impaired and, if so, the impairment loss to be recognized. 2. Prepare the journal entry to record the impairment. 3. Next Level How would your answer to Requirement 1 change if the discount rate was 18% and the cash flows were expected…
- On January 1, 2022, the Vallahara Company purchased machinery for P 650,000 which it installed in a rented factory. It is depreciating the machinery over 12 years by the straight-line method to a residual value of P 50,000. Late in 2026, because of increasing competition in the industry, the company believes that its asset may be impaired and will have a remaining useful life of five years, over which it estimates the asset will produce total cash inflows of P 1,000,000 and will incur total cash outflows of P 825,000. The cash flows are independent of the company's other activities and will occur evenly each year. The company is not able to determine the fair value based on a current selling price of the machinery. The company's discount rate is 10%. Required 1. Prepare schedules to determine whether, at the end of 2026, the machinery is impaired and, if so, the impairment loss to be recognized. 2. If the machinery is impaired, prepare the journal entry to record the impairment.…On January 1, 2022, the Vallahara Company purchased machinery for P 650,000 which it installed in a rented factory. It is depreciating the machinery over 12 years by the straight-line method to a residual value of P 50,000. Late in 2026, because of increasing competition in the industry, the company believes that its asset may be impaired and will have a remaining useful life of five years, over which it estimates the asset will produce total cash inflows of P 1,000,000 and will incur total cash outflows of P 825,000. The cash flows are independent of the company’s other activities and will occur evenly each year. The company is not able to determine the fair value based on a current selling price of the machinery. The company’s discount rate is 10%. Required 1. Prepare schedules to determine whether, at the end of 2022, the machinery is impaired and, if so, the impairment loss to be recognized. 2. If the machinery is impaired, prepare the journal entry…Irwin, Incorporated constructed a machine at a total cost of $35 million. Construction was completed at the end of 2020 and the machine was placed in service at the beginning of 2021. The machine was being depreciated over a 10-year life using the sum-of-the-years’-digits method. The residual value is expected to be $2 million. At the beginning of 2024, Irwin decided to change to the straight-line method. Ignoring income taxes, prepare the journal entry relating to the machine for 2024. Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Do not round intermediate calculations. Enter your answers in millions rounded to 1 decimal place (i.e., 5,500,000 should be entered as 5.5).