Independent Energy depreciates all assets using the straight-line method. The company's fiscal year end is December 31. The following selected transactions and events occurred during the first three years:

2020

Jan

1

Purchased equipment from the Equipment World for $214,500 on account.

Independent Energy also incurred freight and installation costs of $1,500 and $4,000 respectively.

Sep

30

Paid for annual insurance of $4,200 and routine maintenance of $1,700 for the

machine. The insurance policy expires on September 30, 2021.

Dec

31

Recorded 2020 depreciation on the basis of an estimated 10-year useful life and

residual value of $20,000.

2021

Dec

31

Recorded 2021 depreciation and impairment loss (if any). Independent Energy

conducted an impairment assessment as indicators suggested that an impairment may be possible. It was determined that the recoverable amount of the equipment is currently $160,000. The estimated residual value remained unchanged.

2022

Dec

31

Independent Energy sold the equipment to Engaged Auto Company for

proceeds of $140,000. Instructions Prepare the necessary entries. (Show calculations.)