Question

Presented below is information related to equipment owned by Nash Company at December 31, 2020. Cost Accumulated depreciation to date Expected future net cash flows Fair value $9,180,000 1,020,000 7,140,000 4,896,000 Nash intends to dispose of the equipment in the coming year. It is expected that the cost of disposal will be $20,400. 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 = $9,180,000 - $1,020,000 - ($4,896,000 - $20,400) = $3,284,400

Recovery of impairment loss = $5,406,000 - ($4,875,600 + $20,400) = $510,000

Date	Account titles and explanation	Debit	Credit
Dec 31, 2020	Loss on impairment	$3,284,400	-
	Accumulated depreciation	-	$3,284,400
	(To record impairment loss)
Dec 31, 2021	No entry
Dec 31, 2021	Accumulated depreciation	$510,000	-
	Recovery of loss from impairment	-	$510,000
	(To record the increase in the value)