Question

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

Cost		$9,270,000
Accumulated depreciation to date		1,030,000
Expected future net cash flows		7,210,000
Fair value		4,944,000

Swifty intends to dispose of the equipment in the coming year. It is expected that the cost of disposal will be $20,600. 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. (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

  

  

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

  

  

The asset was not sold by December 31, 2021. The fair value of the equipment on that date is $5,459,000. Prepare the journal entry (if any) necessary to record this increase in fair value. It is expected that the cost of disposal is still $20,600. (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

Working as follows:

________________________________________________________________________

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.

________________________________________________________________________

Prepare the journal entry (if any) necessary to record this increase in fair value.

Date	Account Titles and Explanation	Debit	Credit
	No entry

Note: Restoration of an impairment loss is not allowed. Therefore no entry is passed when an increase in fair value.