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 .519 PV of an annuity of $1 3.433 FV of $1 1.925 FV of an annuity of $1 6.610

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 .519 PV of an annuity of $1 3.433 FV of $1 1.925 FV of an annuity of $1 6.610

Name: On January 1, 2020 Hill Bowling purchased equipment for $3.5 million.
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Description: 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

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter19: Capital Investment

Section: Chapter Questions

Problem 6CE

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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 .519 PV of an annuity of $1 3.433 FV of $1 1.925 FV of an annuity of $1 6.610 Hill BowlingImpairment TestDecember 31, 2024 Equipment cost $fill in the blank 1 Less: Accumulated depreciation fill in the…
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On 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 $450,000 and will incur cash outflows of $342,000 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…
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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…
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