Presented below is information related to equipment owned by Whispering Company at December 31, 2020.
Cost | $9,990,000 |
Accumulated depreciation to date | 1,110,000 |
Expected future net cash flows | 7,770,000 |
Fair value | 5,328,000 |
Whispering intends to dispose of the equipment in the coming year. It is expected that the cost of disposal will be $22.200. As of December 31, 2020, the equipment has a remaining useful life of 4 years.
Prepare the journal entry (if any) to record the impairment of the asset at December 31, 2020.
Prepare the journal entry (if any) to record depreciation expense for 2021.
The asset was not sold by December 31, 2021. The fair value of the equipment on that date is $5,883,000. Prepare the journal entry (if any) necessary to record this increase in fair value. It is expected that the cost of disposal is still $22,200.
(a) | |||
Date | Account Titles and Explanation | Debit | Credit |
Dec. 31 | Loss on impairment | $ 3,552,000 | |
Accumulated depreciation-Equipment | $ 3,552,000 | ||
(To record the Loss on Impairment of the Asset ) | |||
Working note : | |||
Cost | $ 9,990,000 | ||
Less: Accumulated depreciation to date | ($ 1,110,000) | ||
Carrying Amount | $ 8,880,000 | ||
Less: Fair value | ($ 5,328,000) | ||
Loss on impairment | $ 3,552,000 |
Account Titles and Explanation | Debit | Credit |
No entry | $ 0 | |
No entry | $ 0 | |
(Since assets intended to be disposed off ) |
Date | Account Titles and Explanation | Debit | Credit |
Dec. 31 | Accumulated depreciation-Equipment | $ 555,000 | |
Recovery of loss on Impairment ( $ 5,883,000 (-) $ 5,328,000) |
$ 555,000 | ||
(To record the recovery of loss) |
Presented below is information related to equipment owned by Whispering Company at December 31, 2020.
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