Question

Technique Co. has equipment with a carrying amount of $1,600,000. The expected future net cash flows from the equipment are $1,630,000, and its fair value is $1,360,000. The equipment is expected to be used in operations in the future.

What amount (if any) should Technique report as an impairment to its equipment?


a. No impairment should be reported.
b. $240,000
c. $30,000
d. $270,000

Answer 1

correct option is a. No impairment should be reported

Step-by-step explanation:

given data

carrying amount = $1,600,000

net cash flows = $1,630,000

fair value = $1,360,000

to find out

amount report as an impairment to its equipment

solution

we know that here impairment loss is carrying amount - higher of fair market value and value in use ..................1

here recoverable value is = $1630000

so

impairment loss is = $1600000 - $1630000

impairment loss = - $30000

here loss is negative

so that correct option is a. No impairment should be reported