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
