E11-16B (Impairment) Presented below is information related to equipment owned by Davis Company at December 31, 2014. Cost $6,750,000 Accumulated depreciation to date 750,000 Expected future net cash flows 5,250,000 Fair value 3,600,000 Assume that Davis

E11-16B (Impairment) Presented below is information related to equipment owned by Davis Company at December 31, 2014.

Cost                                                 $6,750,000

Accumulated depreciation to date        750,000

Expected future net cash flows        5,250,000

Fair value                                           3,600,000

Assume that Davis will continue to use this asset in the future. As of December 31, 2014, the equipment has a remaining useful life of 4 years.

Instructions

(a) Prepare the journal entry (if any) to record the impairment of the asset at December 31, 2014.

(b) Prepare the journal entry to record depreciation expense for 2015.

(c) The fair value of the equipment at December 31, 2015, is $3,825,000. Prepare the journal entry (if

any) necessary to record this increase in fair value.