On December 31, 2012, CA Inc. had a machine with an original cost of $20,000 and accumulated depreciation of $5,000. An impairment test on that date indicated that the machine had a value in use of $12,000 and a fair value of $10,000 (no disposal costs). What impairment loss is recorded for fiscal 2012?
A)$3,000
B)$5,000
C)$8,000
D)$10,000

Question

Quizplus · Accepted Answer

The carrying amount of the machine is $15,000 ($20,000 cost - $5,000 accumulated depreciation). The recoverable amount is the higher of the value in use ($12,000) and the fair value ($10,000), which is $12,000. The impairment loss is the carrying amount minus the recoverable amount: $15,000 - $12,000 = $3,000.