The information that follows relates to equipment owned by Bonita Limited at December 31, 2020:

Cost		$9,990,000
Accumulated depreciation to date		1,110,000
Expected future net cash flows (undiscounted)		7,770,000
Expected future net cash flows (discounted, value in use)		7,048,500
Fair value		6,882,000
Costs to sell (costs of disposal)		55,500

At December 31, 2020, Bonita discontinues use of the equipment and intends to dispose of it in the coming year by selling it to a competitor. It is expected that the costs of disposal will total $55,500.

Assume that Bonita is a private company that follows ASPE. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

1.		Prepare the journal entry at December 31, 2020, to record asset impairment, if any.
2.		Prepare the journal entry to record depreciation expense for 2021.
3.		Assume that the asset was not sold by December 31, 2021. The equipments fair value (and recoverable amount) on this date is $7.22 million. Prepare the journal entry, if any, to record the increase in fair value. It is expected that the costs of disposal will total $55,500.

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