Question

Presented below is information related to equipment owned by Bonita Company at December 31, 2020. Cost $9,810,000 Accumulated depreciation to date 1,090,000 Expected future net cash flows 7,630,000 Fair value 5,232,000 Bonita intends to dispose of the equipment in the coming year. It is expected that the cost of disposal will be $21,800. 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. (If no entry is required, select "No entry"for the account titles and enter 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 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 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.) Account Titles and Explanation Debit Credit 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 $5,777,000. Prepare the journal entry (if any) necessary to record this increase in fair value. It is expected that the cost of disposal is still $21,800. (If no entry is required, select "No entry" for the account titles and enter 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

Date	Account Titles and Explanation	Debit	Credit
Dec.31	Loss on impairment	$ 3,509,800
	Accumulated depreciation-Equipment		$ 3,509,800
	(To record the Impairment of the Asset )
	Workings:
	Cost	$ 9,810,000
	Less: Accumulated depreciation to date	($ 1,090,000)
	Carrying value	$ 8,720,000
	Less: Net Fair value              ( $ 5,232,000 (-) $ 21,800 )	($ 5,210,200)
	Loss on impairment	$ 3,509,800
2)
	Account Titles and Explanation	Debit	Credit
	No Entry	-
	No Entry		-
	(Since it is already disposed off)

3)
Date	Account Titles and Explanation	Debit	Credit
Dec.31	Accumulated Depreciation - Equipment	$ 545,000
	Recovery of loss from impairment		$ 545,000
	Workings:
	Revised Net Fair value              ( $ 5,777,000 (-) $ 21,800 )	$ 5,755,200
	Less: Old Fair value              ( $ 5,232,000 (-) $ 21,800 )	($ 5,210,200)
	Recovery of loss from impairment	$ 545,000