Question

In: Accounting

Presented below is information related to equipment owned by Whispering Company at December 31, 2020. Cost...

Presented below is information related to equipment owned by Whispering Company at December 31, 2020.

Cost $9,990,000
Accumulated depreciation to date 1,110,000
Expected future net cash flows 7,770,000
Fair value 5,328,000


Whispering intends to dispose of the equipment in the coming year. It is expected that the cost of disposal will be $22,200. As of December 31, 2020, the equipment has a remaining useful life of 4 years.

Correct answer iconYour 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

enter an account title to record the transaction on December 31, 2017

enter a debit amount

enter a credit amount

enter an account title to record the transaction on December 31, 2017

enter a debit amount

enter a credit amount

eTextbook and Media

List of Accounts

  

  

New attempt is in progress. Some of the new entries may impact the last attempt grading.Your answer is partially correct.

Prepare the journal entry (if any) to record depreciation expense for 2021. (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.)

Account Titles and Explanation

Debit

Credit

enter an account title

enter a debit amount

enter a credit amount

enter an account title

enter a debit amount

enter a credit amount

eTextbook and Media

List of Accounts

  

  

Incorrect answer iconYour answer is incorrect.

The asset was not sold by December 31, 2021. The fair value of the equipment on that date is $5,883,000. Prepare the journal entry (if any) necessary to record this increase in fair value. It is expected that the cost of disposal is still $22,200. (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

enter an account title to record the transaction on December 31, 2018

enter a debit amount

enter a credit amount

enter an account title to record the transaction on December 31, 2018

enter a debit amount

Solutions

Expert Solution

a
Account Titles and Explanation Debit Credit
Loss on impairment 3574200
        Accumulated depreciation-Equipment 3574200
b
Account Titles and Explanation Debit Credit
No entry 0
      No entry 0
c
Account Titles and Explanation Debit Credit
Accumulated depreciation-Equipment 555000
      Recovery of loss on Impairment 555000
Workings:
Cost 9990000
Less: Accumulated depreciation 1110000
Carrying Amount 8880000
Less: Fair value, net of disposal costs 5305800 =5328000-22200
Loss on impairment 3574200
No depreciation is recorded on assets intended to be disposed off
Fair value, net of disposal costs, Revised 5860800 =5883000-22200
Less: Fair value, net of disposal costs 5305800 =5328000-22200
Recovery of loss on Impairment 555000

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