Question 4 Presented below is information related to equipment owned by Carpenter Company at December 31, 2014. Cost $9,000,000 Accumulated Depreciation to date $1,000,000 Expected future net cash flows $7,000,000 Fair Value $4,400,000 Assume Carpenter Company will continue to use this asset in the future. As of December 31, 2014, the equipment has a remaining useful life of 4 years. (1) Prepare the journal entry (if any) to record the impairment of the asset at December 31, 2014. (2) Prepare the journal entry (if any) to record depreciation expense for 2015. (3) The fair value of the equipment at December 31, 2015 is $5,100,000. Prepare the journal entry (if any) necessary to record the increase in fair value. Impairment loss on the asset. (9,000,000 1,000,000) 4,400,000 = 3,600,000 Depreciation Expense 8,000,000/4 years = 2,000,000 Journal Entries: 1) Loss on Impairment 3,600,000dr. Accumulated Impairment Loss 3,600,000cr. 2) Depreciation Expense 2,000,000dr. Accumulated Depreciation 2,000,000cr. 3) No entry required

Question 5 Assume the same facts as Question 5 above except that Carpenter Company intends to dispose of the equipment in the coming year and that the cost of disposal is $20,000. (1) Prepare the journal entry (if any) to record the impairment of the asset at December 31, 2014. (2) Prepare the journal entry (if any) to record depreciation expense for 2015. (3) The asset was not sold by December 31, 2015. The fair value of the equipment at December 31, 2015 is $5,100,000. Prepare the journal entry (if any) necessary to record the increase in fair value assuming the cost of disposal is still $20,000.