Presented below is information related to equipment owned by Davis Company at December 31, 2020.                                          Cost                                                   $6,750,000                                    Accumulated depreciation to date              750,000 Expected future net cash flows          5,250,000 Fair value                                           3,600,000 Assume that Davis intends to dispose of the equipment in the coming year. 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. Prepare the journal entry (if any) to record depreciation expense for 2021. The asset was not sold by December 31, 2021. The fair value of the equipment on that date is $3,975,000. Prepare the journal entry (if any) necessary to record this increase in fair value.

Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter11: Depreciation, Depletion, Impairment, And Disposal
Section: Chapter Questions
Problem 7P: Dinnell Company owns the following assets: In the year of acquisition and retirement of an asset,...
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Presented below is information related to equipment owned by Davis Company at December 31, 2020.

                                         Cost                                                   $6,750,000

                                   Accumulated depreciation to date              750,000

Expected future net cash flows          5,250,000

Fair value                                           3,600,000

Assume that Davis intends to dispose of the equipment in the coming year. 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.
  • Prepare the journal entry (if any) to record depreciation expense for 2021.
  • The asset was not sold by December 31, 2021. The fair value of the equipment on that date is $3,975,000. Prepare the journal entry (if any) necessary to record this increase in fair value.
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