A machine with a carrying amount of $9000 has a net selling price of $8000.The replacement cost of this asset is $10 000 and the present value of future cash flows is $9500.What is the deprival value of the machine?

Question

Quizplus · Accepted Answer

The deprival value of an asset is the higher of the replacement cost and the present value of future cash flows. In this case, the replacement cost of the machine is $10,000, and the present value of future cash flows is $9,500, which is higher. Therefore, the deprival value of the machine is $9,500. Since the net selling price is lower than the carrying amount, there is an impairment loss of $1,000 ($9,000 - $8,000). However, this is not relevant to the calculation of the deprival value.

A Machine with a Carrying Amount of $9000 Has a Net