Zenda Corporation purchased a building for $800,000. The current book value of the building is $400,000 and the fair value is $360,000. The sum of future cash flows from the building is $320,000. The amount of impairment loss that should be recognized is

Question

Quizplus · Accepted Answer

The impairment loss is calculated as the difference between the carrying value (book value) and the fair value. In this case, the carrying value is $400,000 and the fair value is $360,000, resulting in a difference of $40,000. Since the sum of future cash flows from the building is less than its carrying value, an impairment loss should be recognized. Therefore, the correct answer is B) $40,000.

Zenda Corporation Purchased a Building for $800,000