Anali Corporation has determined that its drilling equipment is impaired. The cost of the equipment is $210,000. Accumulated depreciation recorded to date is $140,000. Anali has determined, that based on market data, the recoverable amount will be $45,000. Determine the amount of the impairment loss that Anali will be required to record.
A) $25,000
B) $70,000
C) $45,000
D) $210,000

Question

Quizplus · Accepted Answer

The impairment loss is calculated as the difference between the carrying amount of the asset and its recoverable amount. The carrying amount is the cost of the asset minus accumulated depreciation, which is $210,000 - $140,000 = $70,000. The recoverable amount is the higher of the fair value less costs to sell and the value in use. In this case, the recoverable amount is $45,000. Therefore, the impairment loss is $70,000 - $45,000 = $25,000.

Anali Corporation Has Determined That Its Drilling Equipment Is Impaired