Question

Presented below is information related to equipment owned by Coronado Company at December 31, 2020.

Cost		$10,080,000
Accumulated depreciation to date		1,120,000
Expected future net cash flows		7,840,000
Fair value		5,376,000

Assume that Coronado will continue to use this asset in the future. As of December 31, 2020, the equipment has a remaining useful life of 5 years.

Prepare the journal entry (if any) to record the impairment of the asset at December 31, 2020. (If no entry is required, select "No entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Date	Account Titles and Explanation	Debit	Credit
Dec. 31	enter an account title to record the transaction on December 31, 2017	enter a debit amount	enter a credit amount
	enter an account title to record the transaction on December 31, 2017	enter a debit amount	enter a credit amount

Prepare the journal entry to record depreciation expense for 2021. (If no entry is required, select "No entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Account Titles and Explanation	Debit	Credit
enter an account title	enter a debit amount	enter a credit amount
enter an account title	enter a debit amount	enter a credit amount

The fair value of the equipment at December 31, 2021, is $5,712,000. Prepare the journal entry (if any) necessary to record this increase in fair value. (If no entry is required, select "No entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Date	Account Titles and Explanation	Debit	Credit
Dec. 31	enter an account title to record the transaction on December 31, 2018	enter a debit amount	enter a credit amount
	enter an account title to record the transaction on December 31, 2018	enter a debit amount	enter a credit amount

Answer 1

a
Account Titles and Explanation	Debit	Credit
Loss on impairment	3584000
Accumulated depreciation-Equipment		3584000
b
Account Titles and Explanation	Debit	Credit
Depreciation expense	1075200
Accumulated depreciation-Equipment		1075200
c
Account Titles and Explanation	Debit	Credit
No entry	0
No entry		0
Workings:
Cost	10080000
Less: Accumulated depreciation	1120000
Carrying Amount	8960000
Less: Fair value	5376000
Loss on impairment	3584000
Revised Carrying amount	5376000
Divide by Remaining life	5
Depreciation expense for 2021	1075200
Restoration of impairment loss is not permitted. No entry is required to record increase in fair value.