Presented below is information related to equipment owned by ABC on December 31, 2012. Cost $300,000 Accumulated
Question:
Presented below is information related to equipment owned by ABC on December 31, 2012.
Cost $300,000
Accumulated depreciation to date 120,000
As of December 31, 2012, ABC estimates that the equipment’s cash flows will total $160,000 and the present value of the equipment’s future cash flows is $145,000. As of December 31, 2013, the equipment has a salvage value of $10,000 and is expected to produce 200,000 units over its remaining life. ABC uses an activity based depreciation method and produced 25,000 units in 2013. On December 31, 2013, the company estimated $125,000 to be the equipment’s undiscounted cash flows and a fair value of $120,000 for the equipment.
Determine the impairment loss that should be booked in 2013, if the asset was being used in the company’s business. Assume all prior year impairments, if necessary, were correctly recorded and depreciation, if necessary, was properly recorded for the current year.
a). $20,000
b). $40,000
c). $6,875
d). $8,125
Determine the impairment loss that should be booked in 2012, assuming the asset was held for sale and the company estimated a cost to sell of $5,000.
a). $20,000
b). $35,000
c). $40,000
d). $155,000
Expert Answer:
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