E11-18 (Impairment) The management of Sprague Inc. wasdiscussing whether certain

E11-18 (Impairment) The management of Sprague Inc. wasdiscussing whether certain equipmentshould be written off as a charge to current operations because ofobsolescence. This equipment has a costof $900000 with depreciation to date of $400000 as of December31 2010. On December 31 2010 managementprojected its future net cash flows from this equipment to be$300000 and its fair value to be$280000. The company intends to use this equipment in thefuture.Instructions(a) Prepare the journal entry (if any) to record the impairment atDecember 31 2010.(b) Where should the gain or loss (if any) on the write-down bereported in the income statement?(c) At December 31 2011 the equipments fair value increased to$300000. Prepare the journal entry(if any) to record this increase in fair value.(d) What accounting issues did management face in accounting forthis impairment?