Flynn Company purchased a building for $400,000.At the end of the current year,the book value of the building is $220,000 and its fair value is $180,000.Assuming the building is rented to a tenant,the sum of future cash flows from the rental of the building is expected to be $160,000.What is the amount of impairment loss?
A) $0
B) $20,000
C) $40,000
D) $120,000

Question

Quizplus · Accepted Answer

The carrying amount of the building ($220,000) exceeds its recoverable amount ($180,000), which is the higher of its fair value ($180,000) and its value in use ($160,000). Therefore, there is an impairment loss of $40,000 ($220,000 - $180,000).

Flynn Company Purchased a Building for $400,000