Hana Co. manufactures toaster ovens. At the end of Year 1, Hana's management believes that the...

 

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Hana Co. manufactures toaster ovens. At the end of Year 1, Hana's management believes that the demand for Hana's toaster ovens will decrease. The ovens are manufactured using specialized equipment with a historic cost of $4,000,000 and accumulated depreciation of $2,520,000. The managers estimate the equipment has a remaining useful life of 4 years and will generate the following undiscounted cash flows: 18. Year 2 $640,000 Year 3 420,000 Year 4 190,000 Year 5 25,000 Salvage value 50,000 If the equipment were sold today, the sales price would be $1,600,000. Is the equipment considered impaired? Why, or why not? Use a discount rate 8% * E (1 Point) Yes, because the discounted cash flows are lower than the carrying amount of the asset. O b. No, because the fair value of the equipment is greater than the carrying value of the asset. O c. Yes, because the discounted cash flows are less than the fair value of the equipment. No, because the discounted cash flows are greater than the carrying amount of the asset. s are Hana Co. manufactures toaster ovens. At the end of Year 1, Hana's management believes that the demand for Hana's toaster ovens will decrease. The ovens are manufactured using specialized equipment with a historic cost of $4,000,000 and accumulated depreciation of $2,520,000. The managers estimate the equipment has a remaining useful life of 4 years and will generate the following undiscounted cash flows: 18. Year 2 $640,000 Year 3 420,000 Year 4 190,000 Year 5 25,000 Salvage value 50,000 If the equipment were sold today, the sales price would be $1,600,000. Is the equipment considered impaired? Why, or why not? Use a discount rate 8% * E (1 Point) Yes, because the discounted cash flows are lower than the carrying amount of the asset. O b. No, because the fair value of the equipment is greater than the carrying value of the asset. O c. Yes, because the discounted cash flows are less than the fair value of the equipment. No, because the discounted cash flows are greater than the carrying amount of the asset. s are

Answer rating: 100% (QA)

Answer Answer is option b ie No because the fair market value of the equipment is gr... View the full answer