Roland SE uses special strapping equipment in its packaging business. The equipment was purchased in January 2021

Question:

Roland SE uses special strapping equipment in its packaging business. The equipment was purchased in January 2021 for €10,000,000 and had an estimated useful life of 8 years with no residual value. At December 31, 2022, new technology was introduced that would accelerate the obsolescence of Roland’s equipment. Roland’s controller estimates that the present value of expected future net cash flows on the equipment will be €5,300,000 and that the fair value less costs to sell the equipment will be €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. 


Instructions

a. Prepare the journal entry (if any) to record the impairment at December 31, 2022 depreciation for 2022 has been recorded.

b. Prepare any journal entries for the equipment at December 31, 2023. The recoverable amount of the equipment at December 31, 2023, is estimated to be €4,900,000.

c. Repeat the requirements for (a) and (b), assuming that Roland intends to dispose of the equipment and that it has not been disposed of as of December 31, 2023.

Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For  book-img-for-question

Intermediate Accounting IFRS

ISBN: 9781119607519

4th Edition

Authors: Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield

Question Posted: