Northstate University had constructed a theater at a cost of $20 million. It anticipated a useful life of 30 years. After 18 years (with the building 60 percent depreciated), the university dropped its drama program; it no longer had need for a theater. It opted to transform the building into a study hall. A comparable study hall could be constructed today for $3 million. When the theater was constructed a construction cost index was at 40; today it is at 120.
1. How much of an impairment loss should the university recognize?
2. What should be the new carrying value of the study hall?

  • CreatedAugust 13, 2014
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