7 A company owns an asset with an original cost of $300,000 and a current book value of $160,000. During a review of the asset for impairment, the company estimates the expected future cash flows from the use and disposal of the asset to be $200,000. There is an active market for this asset, and the fair value of the asset, calculated as the present value of expected future cash flows, is $140,000. Should this asset be considered impaired? O No, because the estimate of expected future cash flows (undiscounted) is greater than the book value. O No, because the estimate of expected future cash flows (undiscounted) is greater than the actual fair value. OYes, because fair value is less than the original cost. O Yes, because the fair value is less than the book value.

7 A company owns an asset with an original cost of $300,000 and a current book value of $160,000. During a review of the asset for impairment, the company estimates the expected future cash flows from the use and disposal of the asset to be $200,000. There is an active market for this asset, and the fair value of the asset, calculated as the present value of expected future cash flows, is $140,000. Should this asset be considered impaired? O No, because the estimate of expected future cash flows (undiscounted) is greater than the book value. O No, because the estimate of expected future cash flows (undiscounted) is greater than the actual fair value. OYes, because fair value is less than the original cost. O Yes, because the fair value is less than the book value.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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28. A tangible fixed asset has a book value of $50,000. Its fair value is $47,000. The sum of the estimated future cash flows is $50,500. The company will recognize: a. $3,000 impairment loss b. $3,500 impairment loss c. $500 impairment gain d. None of the above.
31 When a noncurrent asset is classified as held for sale a. depreciation ceases at the date it is classified as held for sale b. depreciation continues until the asset’s actual sale c. depreciation continues until its carrying value exceeds its fair value less cost to sell d. it is almost certain that the asset will be sold in a short period of time.
7
ok D ences General Optic Corporation operates a manufacturing plant in Arizona. Due to a significant decline in demand for the product manufactured at the Arizona site, an impairment test is deemed appropriate. Management has acquired the following information for the assets at the plant Cost Accumulated depreciation General's estimate of the total cash flows to be generated by selling the products manufactured at its Arizona plant, not discounted to present value The fair value of the Arizona plant is estimated to be $14 million. Required: 1. Determine the amount of impairment loss. 2. If a loss is indicated, prepare the entry to record the loss. 3. & 4. Determine the amount of impairment loss assuming that the estimated undiscounted sum of future cash flows is (3) $15 million instead of $16.2 million and (4) $24.35 million instead of $16.2 million. Complete this question by entering your answers in the tabs below. Req 1 Req 2 Impairment loss Req 3 and 4 Determine the amount of…
5. During the end of the year, YGX Company presented the following information: Equipment Accumulated depreciation However, the equipment is found to be impaired due to obsolescence as well as physical damage. At year-end, the company has determined the following information related to the equipment: Undiscounted net cash inflows Fair value less cost of disposal Value in use or discounted net cash inflows a. 1,500,000 b. 2,000,000 9,000,000 3,500,000 What amount should be reported as impairment loss for the year? c. 500,000 d. 0 4,500,000 3,500,000 3,000,000
TRUE OR FALSE?There is impairment loss if the carrying amount of the asset held for sale is P5,000,000 and the fair value less cost of disposal is P5,200,000.
1.)For an asset to be held for sale,: 1. It must be available for immediate sale in its present condition 2. Its sale must be highly probable 3. The management must be committed to a plan to sell the asset 4. The management must have an active program to locate a buyer 5. The asset must be actively marketed for sale 6. The sale should be expected to be completed within one year from the date of classification 7. The asset should be fully depreciated a. 1 to 6 only b. 1 to 4 only c. 1 to 5 only d. 1 to 7 all 2.)Which of the following is not an objective of PAS 10? a. To prescribe when an entity should adjust its financial statements for events after the reporting period b. To prescribe how an entity should distinguish favorable events from unfavorable c. To prescribe the disclosures that an entity should give about the date when the financial statements were authorized for issue and about events after the reporting period d. To require an entity should not prepare its financial…
B3.
Ali Brothers acquired an intangible assets and predicted that its useful life is indefinite. Which of the following statement is the correct description of amortization? O a. The acquired intangible assets by Ali Brothers can be amortized as per IAS 38. O b. The acquired intangible assets by Ali Brothers cannot be amortized as per IAS 38. O C. As per IAS 38 an intangible asset with indefinite life is tested annually for impairment not amortised. O d. The acquired intangible assets by Ali Brothers can be depreciated as per IAS 16.
Norfolk Plc., an IFRS reporter, is revaluing equipment with a carrying value of £984,500 to its fair value of £964,500. The original cost of the equipment was £1,400,000. The equipment has a 10-year useful life and scrap value of £15,000. Norfolk uses straight-line depreciation. Assume that Norfolk eliminates all prior accumulated depreciation and adjusts the historical cost to fair value. a. What is the revaluation surplus or unrealized loss? b. Where does the firm report the revaluation surplus or unrealized loss in the financial statements? c. What are the journal entries to record the revaluation? d. What is the depreciation expense on the equipment after the revaluation? e. Norfolk chooses to take any revaluation surplus to retained earnings over the equipment's remaining useful life. What is the amount of the surplus, if any, taken to retained earnings in the year after revaluation? f. If Norfolksells the equipment at the end of…