Question

Presented below is Information related to equipment owned by Waterway Company at December 31, 2020. Cost Accumulated depreciation to date Expected futurc nct cash flows Fair value $10.710,000 1,190,000 8.330,000 5,712.000 Assume that Waterway will continue to use this assct in the future. 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 o for the amounts, Credit account titles are automatically indented when amount is entered. Do not indent manually.) Account Titles and Explanation Debit Credit Date Doc. 31 eTextbook and Media List of Accounts Prepare the journal entry to record depreciation expense for 2021. (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.) Account Titles and Explanation Debit Credit eTextbook and Media List of Accounts for the amounts. Credit The fair value of the equipment at December 31, 2021, is $6,069,000. Prepare the journal entry lif any) ncccssary to record this incrcasc in fair valuc. (If no entry is required, select "No entry for the account titles and enter account titles are automatically indented when amount is entered. Do not indent manually.) Date Account Titles and Explanation Debit Credit Dec. 31

Answer 1

a
	Debit	Credit
Loss on impairment	3808000
Accumulated depreciation-Equipment		3808000
b
Depreciation expense	1428000
Accumulated depreciation-Equipment		1428000
c
No entry	0
No entry		0
Workings:
Cost	10710000
Less: Accumulated depreciation	1190000
Carrying Amount	9520000
Less:Fair value, net of disposal costs	5712000
Loss on impairment	3808000
Revised Carrying amount	5712000
Divide by Remaining life	4
Depreciation expense for 2021	1428000
Restoration of impairment loss is not permitted. No entry is required to record increase in fair value.