2. Presented below is information related to equipment owned by Suarez Company at December 31, 2023. Assume that Suarez will continue to use this asset in the future. As of December 31, 2023, the equipment has a remaining useful life of 4 years. Cost Accumulated depreciation to date Expected future net cash flows Fair value $9,000,000 1,000,000 7,000,000 4,800,000 Instruction: [1] Perform a recoverability test for the asset.Calculate the estimated cost of the inventory on May 31. [2] Measure the impairment loss of the asset.
2. Presented below is information related to equipment owned by Suarez Company at December 31, 2023. Assume that Suarez will continue to use this asset in the future. As of December 31, 2023, the equipment has a remaining useful life of 4 years. Cost Accumulated depreciation to date Expected future net cash flows Fair value $9,000,000 1,000,000 7,000,000 4,800,000 Instruction: [1] Perform a recoverability test for the asset.Calculate the estimated cost of the inventory on May 31. [2] Measure the impairment loss of the asset.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
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![2. Presented below is information related to equipment owned by Suarez Company at December 31, 2023.
Assume that Suarez will continue to use this asset in the future. As of December 31, 2023, the equipment has a
remaining useful life of 4 years.
Cost
Accumulated depreciation to date
Expected future net cash flows
Fair value
$9,000,000
1,000,000
7,000,000
4,800,000
Instruction:
[1] Perform a recoverability test for the asset.Calculate the estimated cost of the inventory on May 31.
[2] Measure the impairment loss of the asset.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F4cb3c828-ca20-4bb8-af7b-84ab44bada2d%2F8fa80672-aaf5-45fe-a5b9-4fe61413316f%2Fftcspde_processed.png&w=3840&q=75)
Transcribed Image Text:2. Presented below is information related to equipment owned by Suarez Company at December 31, 2023.
Assume that Suarez will continue to use this asset in the future. As of December 31, 2023, the equipment has a
remaining useful life of 4 years.
Cost
Accumulated depreciation to date
Expected future net cash flows
Fair value
$9,000,000
1,000,000
7,000,000
4,800,000
Instruction:
[1] Perform a recoverability test for the asset.Calculate the estimated cost of the inventory on May 31.
[2] Measure the impairment loss of the asset.
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