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Your answer is partially correct. The fair value of the equipment at December 31, 2021, is $5,763,000. Prepare the journal entry (if any) necessary to record this increase in fair value. (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.) Dato Account Titles and Exnlanation Debit Credit

Your answer is partially correct. The fair value of the equipment at December 31, 2021, is $5,763,000. Prepare the journal entry (if any) necessary to record this increase in fair value. (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.) Dato Account Titles and Exnlanation Debit Credit

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Part a and b are correct. Just need help with part C
**Journal Entry for Fair Value Adjustment of Equipment** On December 31, 2021, the fair value of the equipment is determined to be $5,763,000. The following journal entry is prepared to record the increase in fair value, if necessary. **Instructions:** - If no entry is required, select "No entry" for the account titles and enter 0 for the amounts. - Credit account titles are automatically indented when the amount is entered. Do not indent manually. | Date | Account Titles and Explanation | Debit | Credit | |------------|----------------------------------------|---------|----------| | Dec. 31 | Loss on Impairment | 3,616,000 | | | | Accumulated Depreciation-Equipment | | 3,616,000 | **Additional Resources:** - **eTextbook and Media:** Additional learning materials available. - **List of Accounts:** Reference for account titles and descriptions.
Transcribed Image Text:**Journal Entry for Fair Value Adjustment of Equipment** On December 31, 2021, the fair value of the equipment is determined to be $5,763,000. The following journal entry is prepared to record the increase in fair value, if necessary. **Instructions:** - If no entry is required, select "No entry" for the account titles and enter 0 for the amounts. - Credit account titles are automatically indented when the amount is entered. Do not indent manually. | Date | Account Titles and Explanation | Debit | Credit | |------------|----------------------------------------|---------|----------| | Dec. 31 | Loss on Impairment | 3,616,000 | | | | Accumulated Depreciation-Equipment | | 3,616,000 | **Additional Resources:** - **eTextbook and Media:** Additional learning materials available. - **List of Accounts:** Reference for account titles and descriptions.
Presented below is information related to equipment owned by Sunland Company at December 31, 2020. - **Cost:** $10,170,000 - **Accumulated depreciation to date:** $1,130,000 - **Expected future net cash flows:** $7,910,000 - **Fair value:** $5,424,000 Assume that Sunland will continue to use this asset in the future. As of December 31, 2020, the equipment has a remaining useful life of 4 years. ### (a) **Your answer is correct.** 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 0 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 | Loss on Impairment | 3,616,000| | | | Accumulated Depreciation-Equipment | | 3,616,000 | ### Explanation: 1. **Cost** refers to the original purchase price of the equipment. 2. **Accumulated depreciation to date** indicates the total amount of depreciation that has been recorded against the equipment since it was acquired. 3. **Expected future net cash flows** are the estimated future cash flows that the equipment will generate. 4. **Fair value** is the estimated market value of the equipment as of the given date. 5. The journal entry records the impairment loss, which is the difference between the book value (cost minus accumulated depreciation) and the fair value of the asset. In this case, the impairment loss is $3,616,000. This is recorded by debiting "Loss on Impairment" and crediting "Accumulated Depreciation-Equipment".
Transcribed Image Text:Presented below is information related to equipment owned by Sunland Company at December 31, 2020. - **Cost:** $10,170,000 - **Accumulated depreciation to date:** $1,130,000 - **Expected future net cash flows:** $7,910,000 - **Fair value:** $5,424,000 Assume that Sunland will continue to use this asset in the future. As of December 31, 2020, the equipment has a remaining useful life of 4 years. ### (a) **Your answer is correct.** 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 0 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 | Loss on Impairment | 3,616,000| | | | Accumulated Depreciation-Equipment | | 3,616,000 | ### Explanation: 1. **Cost** refers to the original purchase price of the equipment. 2. **Accumulated depreciation to date** indicates the total amount of depreciation that has been recorded against the equipment since it was acquired. 3. **Expected future net cash flows** are the estimated future cash flows that the equipment will generate. 4. **Fair value** is the estimated market value of the equipment as of the given date. 5. The journal entry records the impairment loss, which is the difference between the book value (cost minus accumulated depreciation) and the fair value of the asset. In this case, the impairment loss is $3,616,000. This is recorded by debiting "Loss on Impairment" and crediting "Accumulated Depreciation-Equipment".
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