Problem 19-3 (AICPA Adapted)Bubba Company determined that there had been a significantdecrease in market value of an equipment used in themanufacturing process. At year-end, the entity compiled thefollowing information:5,000,0003,000,000Original cost of equipmentAccumulated depreciationExpected undiscounted net future cash inflowsrelated to the equipmentFair value of equipment1,750,0001,250,000What amount of impairment loss should be reported?3,250,000b. 3,750,000750,000250,000a.с.d.

Carrying amount of equipment = cost - depreciation = 5,000,000-3,000,000 =2,000,000.

Answered: What amount of impairment loss should…

Business

Accounting

What amount of impairment loss should be reporte a. 3,250,000

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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A company has seven assets (labelled 1 to 7) for which there are indications of possible impairment. The carrying amount, fair value less costs of disposal and value in use for each asset are as shown below. Carrying Amount Fair Value less costs of disposal Value in use $ $ $ Asset 1 25,000 30,000 45,000 Asset 2 27,500 22,500 32,500 Asset 3 17,500 28,750 n/d Asset 4 21,250 16,250 17,500 Asset 5 31,875 n/d 42,000 Asset 6 25,000 35,000 30,000 Asset 7 52,500 37,500 25,000 Note: n/d = not determined Required: a. Calculate the amount of any impairment loss arising in relation to each asset. (Show Recoverable Amount) b. Briefly describe how impairment loss is determined. c. Briefly explain how you determined if there was an impairment loss for assets 4 and 6.
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