Question - Impairment: Presented below is information related to equipment owned by Pujols Company at December 31, 2010.
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Cost
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$9,540,000
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Accumulated depreciation to date
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1,060,000
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Expected future net cash flows
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7,420,000
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Fair value
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5,088,000
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Assume that Pujols will continue to use this asset in the future. As of December 31, 2010, the equipment has a remaining useful life of 4 years.
(a) Prepare the journal entry (if any) to record the impairment of the asset at December 31, 2010.
(b) Prepare the journal entry to record depreciation expense for 2011.
(c) The fair value of the equipment at December 31, 2011, is $5,406,000. Is a journal entry necessary to record this increase in fair value?