Question

Presented below is information related to equipment owned by Metlock Company at December 31, 2020. Cost $9,900,000 Accumulated depreciation to date 1,100,000 Expected future net cash flows 7,700,000 Fair value 5,280,000 Assume that Metlock will continue to use this asset in the future. 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 eTextbook and Media List of Accounts Prepare the journal entry 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 fair value of the equipment at December 31, 2021, is $5,610,000. 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 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
	Debit	Credit
Loss on impairment	3520000
Accumulated depreciation-Equipment		3520000
b
	Debit	Credit
Depreciation expense	1056000
Accumulated depreciation-Equipment		1056000
c
	Debit	Credit
No entry	0
No entry		0
Workings:
Cost	9900000
Less: Accumulated depreciation	1100000
Carrying Amount	8800000
Less: Fair value	5280000
Loss on impairment	3520000
Revised Carrying amount	5280000
Divide by Remaining life	5
Depreciation expense for 2021	1056000
Restoration of impairment loss is not permitted. No entry is required to record increase in fair value.