Sumptuous Company, a clothing manufacturer, purchased a sewing machine for 2,000,000 on July 1, 2014. The machine had a 10-year useful life, a 100,000 residual value, and was depreciated using the straight line method. On January 1, 2017, a test for impairment indicated that the undiscounted cash flows from the sewing machine are less than carrying amount. The fair value less cost of disposal of the machine on January 1, 2017 is 600,000. What amount of loss on impairment should be recognized?

Sumptuous Company, a clothing manufacturer, purchased a sewing machine for 2,000,000 on July 1, 2014. The machine had a 10-year useful life, a 100,000 residual value, and was depreciated using the straight line method. On January 1, 2017, a test for impairment indicated that the undiscounted cash flows from the sewing machine are less than carrying amount. The fair value less cost of disposal of the machine on January 1, 2017 is 600,000. What amount of loss on impairment should be recognized?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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Question

14. Sumptuous Company, a clothing manufacturer, purchased a sewing machine for 2,000,000 on July 1, 2014.

The machine had a 10-year useful life, a 100,000 residual value, and was depreciated using the straight line method.

On January 1, 2017, a test for impairment indicated that the undiscounted cash flows from the sewing machine are less than carrying amount.

The fair value less cost of disposal of the machine on January 1, 2017 is 600,000.

What amount of loss on impairment should be recognized?

Definition Video Definition Accounting method wherein the cost of a tangible asset is spread over the asset's useful life. Depreciation usually denotes how much of the asset's value has been used up and is usually considered an operating expense. Depreciation occurs through normal wear and tear, obsolescence, accidents, etc. Video

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