Question

Presented below is information related to equipment owned by Windsor Company at December 31, 2020. Cost Accumulated depreciation to date Expected future net cash flows Fair value $9,720,000 1,080,000 7,560,000 5,184,000 Windsor intends to dispose of the equipment in the coming year. It is expected that the cost of disposal will be $21,600. As of December 31, 2020, the equipment has a remaining useful life of 5 years.

Answer 1

a
	Debit	Credit
Loss on impairment	3477600
Accumulated depreciation-Equipment		3477600
b
	Debit	Credit
No entry	0
No entry		0
c
	Debit	Credit
Accumulated depreciation-Equipment	540000
Recovery of loss on Impairment		540000
Workings:
Cost	9720000
Less: Accumulated depreciation	1080000
Carrying Amount	8640000
Less: Fair value, net of disposal costs	5162400		=5184000-21600
Loss on impairment	3477600
No depreciation is recorded on assets intended to be disposed off
Fair value, net of disposal costs, Revised	5702400		=5724000-21600
Less: Fair value, net of disposal costs	5162400
Recovery of loss on Impairment	540000