Question

Windsor Co. has equipment with a carrying amount of $725,100. The expected future net cash flows from the equipment are $730,100, and its fair value is $621,730. The equipment is expected to be used in operations in the future. What amount (if any) should Windsor report as an impairment to its equipment?

Answer 1

Asset is impaired if its Carrying Value exceeds its Recoverable Amount.

No impairment to its equipment is needed to be reported

Step-by-step explanation:

Data provided in the question:

Carrying amount of equipment = $725,100

Net cash flows from the equipment = $730,100

Fair value = $621,730

Now,

Impairment loss = Carrying amount - Recoverable amount

Also,

Recoverable amount = Higher of Future net Cash Flows and Fair Value.

Thus,

Recoverable amount = Higher of ( $730,100 and $621,730)

or

Recoverable amount = $730,100

Therefore,

Impairment loss = $725,100 - $730,100

= - $5000

Here,

the negative sign depicts that there is not loss

also,

Asset is impaired if its Carrying Value exceeds its Recoverable Amount.

Hence,

The no impairment to its equipment is needed to be reported