Instructions: 1. Prepare the journal entry (if any) to record the impairment of the asset at December 31, 2020. 2. Prepare the journal entry to record depreciation expense for 2021. 3. The asset was not sold by December 31, 2021. The fair value of the equipment on that date is $6,825,000. Prepare the journal entry (if any) necessary to record the increase in fair value. It is expected that the cost of disposal is still $15,000.

Instructions: 1. Prepare the journal entry (if any) to record the impairment of the asset at December 31, 2020. 2. Prepare the journal entry to record depreciation expense for 2021. 3. The asset was not sold by December 31, 2021. The fair value of the equipment on that date is $6,825,000. Prepare the journal entry (if any) necessary to record the increase in fair value. It is expected that the cost of disposal is still $15,000.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

Presented below is information related to equipment owned by
Davis Company at December 31, 2020.
Cost
Accumulated Depreciation to date
Expected future net cash flows
(undiscounted)
Fair value
$7,750,000
750,000
Instructions:
6,250,000
6,600,000
Assume that Davis intends to dispose of the asset in the coming
year. It is expected the cost of disposal will be $15,000. As of
December 31, 2020, the equipment has a remaining useful life of 5
years.
1. Prepare the journal entry (if any) to record the impairment of the
asset at December 31, 2020.
2. Prepare the iournal entry to record depreciation expense for

Instructions:
1. Prepare the journal entry (if any) to record the impairment of the
asset at December 31, 2020.
2. Prepare the journal entry to record depreciation expense for
2021.
3. The asset was not sold by December 31, 2021. The fair value of
the equipment on that date is $6,825,000. Prepare the journal
entry (if any) necessary to record the increase in fair value. It is
expected that the cost of disposal is still $15,000.
4

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