1) ABC, Company has equipment with a historical cost of $600,000 and accumulated depreciation with a balance of $402,000. The estimated future cash flows for this asset for the remaining three years is $65,000 per year, the company uses a discount rate of 8%. a) Did an impairment occur, yes or no? How do you know this? b) If an impairment occurred, calculate the new fair market value of the asset. c) Make the journal entry to reflect any impairment d) Calculate depreciation expense for the three remaining years of the asset.
1) ABC, Company has equipment with a historical cost of $600,000 and accumulated depreciation with a balance of $402,000. The estimated future cash flows for this asset for the remaining three years is $65,000 per year, the company uses a discount rate of 8%. a) Did an impairment occur, yes or no? How do you know this? b) If an impairment occurred, calculate the new fair market value of the asset. c) Make the journal entry to reflect any impairment d) Calculate depreciation expense for the three remaining years of the asset.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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