Wilson Inc. owns equipment for which it paid $70 million. At the end of 2009, it had accumulated depreciation on the equipment of $12 million. Due to adverse economic conditions, Wilson's management determined that it should assess whether an impairment should be recognized for the equipment. The estimated undiscounted future cash flows to be provided by the equipment total $60 million, and the equipment's fair value at that point is $50 million. Under these circumstances, Wilson:
A)Would record no impairment loss on the equipment.
B)Would record an $8 million impairment loss on the equipment.
C)Would record a $20 million impairment loss on the equipment.
D)None of these is correct.The undiscounted cash flows ($60 million) exceed the book value ($58 million), so no impairment is required.

Question

Quizplus · Accepted Answer

The undiscounted cash flows ($60 million) exceed the book value ($58 million), so no impairment is required.