Question: During its most recent fiscal year Bargain Airlines grounded 10
During its most recent fiscal year, Bargain Airlines grounded 10 of its 747s due to a potential problem with the wing flaps. Although the planes had been repaired by the end of the fiscal year, the company believed the problems indicated the need for an evaluation of potential impairment of these planes. The results of the analysis indicated that the planes had permanently declined in fair value by $120 million below their book value. What effect would this decline in value have on Bargain Airlines’ net income for the year?
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