Lilliput Boutique owns a small retail outlet in a California coastal town. In the last few years,
Question:
Lilliput Boutique owns a small retail outlet in a California coastal town. In the last few years, a significant percentage of the residents have moved further inland after a number of landslides destroyed area homes. The building was purchased on January 1,1990, at a cost $1,200,000. The building has been depreciated assuming a service life of 40 years, $300,000 salvage value.
The company's chief financial officer is concerned about impairment. A conservative estimate of future annual net cash flows is $60,000. Lilliput Boutique uses 6% as a discount rate. An independent appraiser estimates the fair value of the property at $450,000.
What should Lilliput Boutique report as the impairment loss, if any in the 2020 financial statements?
Management Accounting
ISBN: 9780730369387
4th Edition
Authors: Leslie G. Eldenburg, Albie Brooks, Judy Oliver, Gillian Vesty, Rodney Dormer, Vijaya Murthy, Nick Pawsey