A company bought machinery on January 1,2010,for $200,000.On January 2,2012,the machinery had a book value of $100,000.It is estimated that the machine will generate future cash flows of $70,000 and its current fair value is $60,000.How much impairment loss should be recorded?
A)$0
B)$30,000
C)$40,000
D)$100,000

Question

Quizplus · Accepted Answer

The impairment loss should be recorded when the carrying value of an asset exceeds its recoverable amount. In this case, the recoverable amount is the higher of the machine's fair value ($60,000) and its value in use ($70,000). Since the book value of the machine ($100,000) exceeds both of these values, an impairment loss should be recorded. The amount of the impairment loss is the book value minus the recoverable amount, or $100,000 - $70,000 = $30,000. Therefore, the correct answer is choice B.

A Company Bought Machinery on January 1,2010,for $200,000