Question

1. The following information will be used for 3 problems on the exam:

   Presented below is information related to equipment owned by Urithiru Industries at December 31, 2020:

   • Cost: $100,000
   • Accumulated Depreciation to date: $64,000
   • Undiscounted expected net future cash flows: $28,000
   • Value of a very similar asset traded in the market: $24,000
   • Estimated disposal costs: $2,000

   What is the amount of impairment loss to be recorded at 12/31/2020 assuming the asset is being will be held for use in the future?

   		$12,000
   		$8,000
   		$14,000
   		None of the other answer choices is correct.
   		$10,000

Answer 1

Impairment loss is calculated when the undiscounted net fture cash flows is less than book value of assets .In this case book value is cost - acc dep which is $100000-$64000 = $36000 and undiscounted cash flows are $28000 . Since it ia less than book value hence impairment loss will arise.

But the impairment loss will be differenc of market value and book value which is $24000- $36000 which is $12000 . So option A is the correct option and hence impairment loss assuming that asset is held for future use is $12000.