Bio Ltd purchased a piece of equipment in January 2016 for $5,000,000 which had an...
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Accounting
Bio Ltd purchased a piece of equipment in January 2016 for $5,000,000 which had an estimated useful life of 8 years with no residual value. By 31 December 2018, new technology was introduced that would accelerate the obsolescence of this equipment. Bio Ltd estimated that the present value of the expected future net cash flows on this equipment would be $2,600,000 and that the fair value less cost to sell the equipment would be $2,800,000. Bio Ltd intends to continue using the equipment but it is estimated that the remaining useful life is 3 years. Bio Ltd uses straight-line depreciation for this machine. i Prepare the accounting journal entries to record the impairment of this machine at 31 December 2018. Show your workings. ii Suppose that on 31 December 2019, Bio Ltd wants to dispose of this equipment and that it has not yet been disposed of. Prepare the related accounting journal entries. Show your workings.
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