Your company rents out computers to local businesses and schools.You have 1,000 computers with a net book value of $160,000.As a result of changing technology,your computers are more difficult to rent so you must severely reduce your rental price,which causes a decrease in estimated future cash flows.The fair value of the computers is estimated to be $125,000 because of their outmoded technology.Your company should report an asset impairment loss of:
A)$160,000.
B)$125,000.
C)$35,000.
D)none of the above.

Question

Quizplus · Accepted Answer

Since the fair value of the computers is estimated to be $125,000, and their net book value is $160,000, the company should report an asset impairment loss equal to the difference between these two values, which is $35,000. Therefore, the correct answer is C, $35,000.

Your Company Rents Out Computers to Local Businesses and Schools