The information that follows relates to equipment owned by Waterway Limited at December 31, 2020: Cost Accumulated depreciation to date Expected future net cash flows (undiscounted) Expected future net cash flows (discounted, value in use) Fair value Costs to sell (costs of disposal) $8,550,000 950,000 6,650,000 6,032,500 5,890,000 47,500 At December 31, 2020, Waterway 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 $47,500. Assume that Waterway 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 O for the amounts.) 1. 2. 3. Prepare the journal entry at December 31, 2020, to record asset impairment, if any. Prepare the journal entry to record depreciation expense for 2021. Assume that the asset was not sold by December 31, 2021. The equipment's fair value (and recoverable amount) on this date is $6.18 million. Prepare the journal entry, if any, to record the increase in fair value. It is expected that the costs of disposal will total $47,500. Your answer is partially correct. Assume that Waterway 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 O for the amounts.) 1. 2. 3. Prepare the journal entry at December 31, 2020, to record asset impairment, if any. Prepare the journal entry to record depreciation expense for 2021. Assume that the asset was not sold by December 31, 2021. The equipment's fair value (and recoverable amount) on this date is $6.18 million. Prepare the journal entry, if any, to record the increase in fair value. It is expected that the costs of disposal will total $47,500. Debit Credit No. Account Titles and Explanation (1) Loss on Impairment 1757500 Accumulated Impairment Losses - Equipment 1757500 Just this entry is incorrect (2) No Entry 0 No Entry 0 (3) Accumulated Impairment Losses - Equipment 290000 Recovery of Loss from Impairment 290000