Augusta Hayward Co.purchased a building for $800,000.At the end of the current year,the book value of the building is $440,000 and its fair value is $360,000.Assuming the building is rented to a tenant,the sum of future cash flows from the rental of the building is expected to be $320,000.What is the amount of impairment loss?
A)$360,000
B)$40,000
C)$80,000
D)$240,000

Question

Quizplus · Accepted Answer

Impairment occurs when events or changed circumstances interfere with a company's ability to recover the value of the asset through future operations.If this occurs,the book value should be written down to what the asset is worth (called fair value)with the amount of the write-down reported as an impairment loss.
Impairment Loss = Book Value − Fair Value
= $440,000 − $360,000 = $80,000