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6. On January 1, 2012, Hamlin Company purchased equipment for $3.2 million. At the end of...

6. On January 1, 2012, Hamlin Company purchased equipment for $3.2 million. At the end of 2017, Hamlin believes the equipment may be impaired due to technological changes. Management has acquired the following information for the equipment: Cost $3,200,000 Accumulated depreciation $1,575,000 Estimated total cash flows - undiscounted $1,200,000 Estimated Fair value of equipment $911,000 a. Determine whether or not Hamlin's equipment is impaired. r IMPAIRED r NOT IMPAIRED b. If impaired, what is the impairment loss? c. Record the journal entry necessary to write down the equipment.

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Answer #1

Carrying value = Cost - Accumulated depreciation

= $3,200,000 - $1,575,000

= $1,625,000

a. The Equipment is impaired as the carrying value ($1,625,000) is greater than undiscounted cash flows ($1,200,000)

b. Impairment loss = Carrying value - Fair value

= $1,625,000 - $911,000

= $714,000

c.

Impairment loss $714,000
Accumulated depreciation $714,000
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