Question

Presented below is information related to equipment owned by Wildhorse Company at December 31, 2020. Cost $10,620,000 Accumulated depreciation to date 1,180,000 Expected future net cash flows 8,260,000 Fair value 5,664,000 Wildhorse intends to dispose of the equipment in the coming year. It is expected that the cost of disposal will be $23,600. As of December 31, 2020, the equipment has a remaining useful life of 5 years.

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 SHOW LIST OF ACCOUNTS LINK TO TEXT LINK TO VIDEO

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 SHOW LIST OF ACCOUNTS LINK TO TEXT LINK TO VIDEO

The asset was not sold by December 31, 2021. The fair value of the equipment on that date is $6,254,000. Prepare the journal entry (if any) necessary to record this increase in fair value. It is expected that the cost of disposal is still $23,600. (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 enter a credit amount

Answer 1

a
Date	Account Titles and Explanation	Debit	Credit
Dec. 31	Loss on impairment	3799600
	Accumulated depreciation-Equipment		3799600
b
	Account Titles and Explanation	Debit	Credit
	No entry	0
	No entry		0
c
Date	Account Titles and Explanation	Debit	Credit
Dec. 31	Accumulated depreciation-Equipment	590000
	Recovery of loss on Impairment		590000
	Workings:
	Cost	10620000
	Less: Accumulated depreciation	1180000
	Carrying Amount	9440000
	Less:Fair value, net of disposal costs	5640400		=5664000-23600
	Loss on impairment	3799600
	No depreciation is recorded on assets intended to be disposed off
	Fair value, net of disposal costs, Revised	6230400		=6254000-23600
	Less: Fair value, net of disposal costs	5640400		=5664000-23600
	Recovery of loss on Impairment	590000