Impairment Dexter Company purchased four convenience store buildings on January 1, 2011, for a total of...

Impairment

Dexter Company purchased four convenience store buildings on January 1, 2011, for a total of

$26,000,000. The buildings have been depreciated using the straight- line method with a 20-year useful life and 5% residual value. As of January 1, 2017, Dexter has converted the buildings into Internet Learning Centers where classes on Internet usage will be conducted six days a week. Because of the change in the use of the buildings, Dexter is evaluating the buildings for possible impairment. Dexter estimates that the buildings have a remaining useful life of 10 years, that their residual value will be zero, that net cash inflow from the buildings will total $1,600,000 per year, and that the current fair value of the four buildings totals $10,000,000.

Instructions:

1. Make the appropriate journal entry, if any, to record an impairment loss as of January 1, 2017.

2. Compute total depreciation expense for 2017.

3. Repeat (1) and (2) assuming that the net cash inflow from the buildings totals $2,200,000 per year. The fair value of the four buildings totals $12,000,000.

Expert Solution

ekkarill92 answered 1 year ago

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