Dolphin company uses special strapping equipment in its

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Dolphin Company uses special strapping equipment in its packaging business. The equipment was purchased in January 2013 for $8,000,000 and had an estimated useful life of 8 years with no salvage value. At December 31, 2014, new technology was introduced that would accelerate the obsolecense of Dolphin's equipment. Dolphin's controller estimates that expected future net cash flows on the equipment will be $5,000,000 and that the fair value of the equipment is $4,400,000. Dolphin intends to continue using the equipment, but it is estimated that the remaining useful life is 4 years. Dolphin uses the straight-line method and the nearest full month assumption to calculate depreciation.
(a) What is the carrying value of the asset on Decemeber 31, 2014?

(b) Prepare the journal entry (if any) to record the impairment at December 31, 2014.

(c) Prepare any journal entries related to the equipment at December 31, 2015. The fair value of the equipment at December 31, 2015, is estimated to be $4,600,000.

(d) Assume that dolphin intends to dispose of the equipment and that it has not been disposed of as of December 31, 2015. Prepare any journal entreis related to the equipment at December 31, 2015. The fair value of the equipment at December 31, 2015, is estimated to be $4,600,000.

Reference no: EM13480889

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