Question

Presented below is information related to equipment owned by Metlock Company at December 31, 2020. Cost $9,900,000 Accumulated depreciation to date 1,100,000 Expected future net cash flows 7,700,000 Fair value 5,280,000 Metlock intends to dispose of the equipment in the coming year. It is expected that the cost of disposal will be $22,000. 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 eTextbook and Media List of Accounts Prepare the journal entry (if any) 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 eTextbook and Media List of Accounts The asset was not sold by December 31, 2021. The fair value of the equipment on that date is $5,830,000. Prepare the journal entry (if any) necessary to record this increase in fair value. It is expected that the cost of disposal is still $22,000. (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	3542000
Accumulated depreciation-Equipment		3542000
b
Account Titles and Explanation	Debit	Credit
No entry	0
No entry		0
c
Account Titles and Explanation	Debit	Credit
Accumulated depreciation-Equipment	550000
Recovery of loss on Impairment		550000
Workings:
Cost	9900000
Less: Accumulated depreciation	1100000
Carrying Amount	8800000
Less:Fair value, net of disposal costs	5258000		=5280000-22000
Loss on impairment	3542000
No depreciation is recorded on assets intended to be disposed off
Fair value, net of disposal costs, Revised	5808000		=5830000-22000
Less: Fair value, net of disposal costs	5258000		=5280000-22000
Recovery of loss on Impairment	550000