Question

Presented below is information related to Equipment owned by Bobcat Manufacturing, Inc. at December 31, 2019.

Answer 1

Answer and Explanation:

The journal entries are shown below:

a. Loss on Impairment  Dr $ 3200,000  

             To Accumulated Deprecation  - equipment  $3,200,000

(Being the impairment loss is recorded)      

For recording this we debited the impairment loss as it increased the loss and credited the accumulated depreciation as it reduced the asset value

The computation is shown below:

Cost                                                                $7,000,000

Less: Accumulated depreciation to date    -$800,000

Carrying amount                                             $6,200,000

Less: Fair value                                              -$3,400,000

Loss on impairment                                        $2,800,000

b. Depreciation expense Dr  $850,000

               To Accumulated depreciation - equipment  $850,000

(Being the depreciation expense is recorded)

For recording this we debited the depreciation expense as it increased the expense and credited the accumulated depreciation as it reduced the asset value

The computation is shown below:

= $3,400,000 ÷ 4 years

= $850,000

c. No journal entry is required for increase in fair value