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The information that follows relates to equipment owned by Waterway Limited at December 31, 2020: Cost $9,720,000 Accumulated depreciation to date 1,080,000 Expected future net

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

Cost $9,720,000
Accumulated depreciation to date 1,080,000
Expected future net cash flows (undiscounted) 7,560,000
Expected future net cash flows (discounted, value in use) 6,858,000
Fair value 6,696,000
Costs to sell (costs of disposal) 54,000

Assume that Waterway will continue to use this asset in the future. As at December 31, 2020, the equipment has a remaining useful life of four years. Waterway uses the straight-line method of depreciation.

Assume that Waterway is a private company that follows ASPE.

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. The equipments fair value at December 31, 2021 is $7.02 million. Prepare the journal entry, if any, to record the increase in fair value.

No.

Date

Account Titles and Explanation

Debit

Credit

(1)

December 31, 2020

Loss on Impairment

1,944,000

Accumulated impairment

1,944,000

(2)

December 31, 2021

Depreciation expense

1,674,000

Accumulated depreciation

1,674,000

(3)

December 31, 2021

No entry

0

No entry

0

Repeat the requirements in (a) above assuming that Waterway is a public company that follows IFRS.

No.

Date

Account Titles and Explanation

Debit

Credit

(1)

December 31, 2020

Loss on impairment

1,782,000

accumulated impairment

1,782,000

(2)

December 31, 2021

depreciation expense

1,714,500

accumulated depreciation

1,714,500

(3)

December 31, 2021

accumulated impairment

Which answer from 3?

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