Question

The management of Waterway Inc. was discussing whether certain equipment should be written off as a charge to current operations because of obsolescence. This equipment has a cost of $1,071,000 with depreciation to date of $476,000 as of December 31, 2020. On December 31, 2020, management projected its future net cash flows from this equipment to be $357,000 and its fair value to be $273,700. The company intends to use this equipment in the future. Prepare the journal entry (if any) to record the impairment at December 31, 2020. (If no entry is required, select "No entry" for the account titles and enter O for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.) Debit Credit Date Account Titles and Explanation Dec. 31 List of Accounts At December 31, 2021, the equipment's fair value increased to $303,700. Prepare the journal entry (if any) to record this increase in fair value. (If no entry is required, select "No entry" for the account titles and enter for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.) Debit Credit Date Account Titles and Explanation Dec. 31

Answer 1

a
	Debit	Credit
Loss on impairment	321300
Accumulated depreciation-Equipment		321300
b
	Debit	Credit
No entry	0
No entry		0
Workings:
Cost	1071000
Less: Accumulated depreciation	476000
Carrying Amount	595000
Less: Fair value	273700
Loss on impairment	321300
Restoration of impairment loss is not permitted. No entry is required to record increase in fair value.