Question

Technique Co. has equipment with a carrying amount of $1,600,000. The expected future net cash flows from the equipment are $1,630,000, and its fair value is $1,360,000.

The equipment is expected to be used in operations in the future.

What amount (if any) should Technique report as an impairment to its equipment?

a. No impairment should be reported.b. $240,000c. $30,000d. $270,00

Answer 1

a. No impairment should be reported

Step-by-step explanation:

In the given situation, we compare the expected future net cash flows and the higher value of book value and fair value.

The comparison is shown below

Since the expected future net cash flows from the equipment i.e $1,630,000 is more than the book value of equipment $1,600,000. The value comes in negative

So, no impairment loss would be recognized