At the end of its 2016 fiscal year,a triggering event caused Janero Corporation to perform an impairment test for one of its manufacturing facilities.The following information is available:
The manufacturing facility is:
A)Impaired because its book value exceeds undiscounted future cash flows.
B)Not impaired because its book value exceeds undiscounted future cash flows.
C)Not impaired because it continues to produce revenue.
D)Impaired because its book value exceeds fair value.

Question

At the end of its 2016 fiscal year,a triggering event caused Janero Corporation to perform an impairment test for one of its manufacturing facilities.The following information is available: 
The manufacturing facility is:
A)Impaired because its book value exceeds undiscounted future cash flows. 
B)Not impaired because its book value exceeds undiscounted future cash flows. 
C)Not impaired because it continues to produce revenue. 
D)Impaired because its book value exceeds fair value.

Quizplus · Accepted Answer

According to the information given, a triggering event caused Janero Corporation to perform an impairment test for its manufacturing facility. The impairment test compares the book value of the asset to the undiscounted future cash flows that will be generated by the asset. If the book value exceeds the undiscounted future cash flows, then the asset is considered impaired and needs to be written down to its fair value. Therefore, option A is the correct choice as the facility is impaired because its book value exceeds undiscounted future cash flows.

At the End of Its 2016 Fiscal Year,a Triggering Event