Question

Basile Enterprises owns machinery with a book value of $467,000. The machinery is expected to generate future net cash flows of $525,000. The machinery has a fair value of $416,000. Basile should recognize a loss on impairment of

Answer 1

Zero

Step-by-step explanation:

In this case, the sum of future cash flows is exceeded than the book value. So, no impairment loss would be recognized

If the book value is more than the generated future cash flows so book value cannot be recovered. In this case, the generated future cash flows are ignored

In this scenario, we compare the values between book value and the fair value of machinery, the difference would be the loss on impairment of the asset

In mathematically,

= Book value - fair value