Alfarabi Company has an asset that had an original cost of $560,000 and depreciation taken to date of $240,000. Management of Alfarabi Company has decided that the asset has suffered an impairment and its expected future net cash flows total $80,000. Further, the asset has a remaining useful life of 3 years and a salvage value of $15,000. No active market exists for the asset and its present value of expected future net cash flows is $61,000. Instructions: a. Prepare the journal entry Alfarabi Company would make to record the impairment in the value of the asset. b. How is the gain or loss on this impairment reported in the income statement?

Alfarabi Company has an asset that had an original cost of $560,000 and depreciation taken to date of $240,000. Management of Alfarabi Company has decided that the asset has suffered an impairment and its expected future net cash flows total $80,000. Further, the asset has a remaining useful life of 3 years and a salvage value of $15,000. No active market exists for the asset and its present value of expected future net cash flows is $61,000. Instructions: a. Prepare the journal entry Alfarabi Company would make to record the impairment in the value of the asset. b. How is the gain or loss on this impairment reported in the income statement?

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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