Final answer:
The carrying amount of Albert Corporation's equipment should decrease by the depreciation expense taken in 2017. Under most accounting standards, an asset's fair value increase after an impairment doesn't reverse the impairment loss. The firm in the Self-Check Question has an accounting profit of $50,000. Option C is correct.
Step-by-step explanation:
In the case of Albert Corporation, the correct answer is C. The carrying amount of the equipment should decrease by the depreciation expense taken in 2017. According to most accounting frameworks such as Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Standards (IFRS), when an asset's fair value decreases below its carrying amount, an impairment loss is recognized to write down the asset to its fair value. However, if the fair value of the equipment subsequently increases, GAAP does not permit a reversal of that impairment loss, while IFRS only allows such a reversal under certain conditions, which may not apply here since Albert has no plans to dispose of the equipment.
Let's address the provided Self-Check Question:
To calculate the accounting profit, deduct the total expenses from the sales revenue. For a firm with sales revenue of $1 million, spending $600,000 on labor, $150,000 on capital, and $200,000 on materials, the accounting profit would be:
- Sales Revenue: $1,000,000
- Total Expenses: ($600,000 + $150,000 + $200,000) = $950,000
- Accounting Profit: $1,000,000 - $950,000 = $50,000
The firm's accounting profit would be $50,000.