Question

Presented below is information related to equipment owned by Marigold Company at December 31, 2020. Cost Accumulated depreciation to date Expected future net cash flows Fair value $9,360,000 1,040,000 7,280,000 4,992,000 Assume that Marigold 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 O 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

Answer 1

Impairment loss = $9,360,000 - $1,040,000 - $4,992,000 = $3,328,000

Depreciation expense = ($9,360,000 - $1,040,000 - $3,328,000) / 5 = $998,400

Date	Account title and explanation	Debit	Credit
Dec 31, 2020	Loss in impairment	$3,328,000	-
	Accumulated depreciation	-	$3,328,000
	(To record impairment loss)
Dec 31, 2021	Depreciation expense	$998,400	-
	Accumulated depreciation	-	$998,400
	(To record depreciation expense)
Dec 31, 2021	No entry