Question

Book value of Bonnaroo stages was $30 million. Fair value is estimated at $5 million (what other festivals would pay for the stage). Impairment would be recorded as:

A) A gain of $25 million.
B) A loss of $25 million.
C) A gain of $5 million.
D) A loss of $5 million.

Answer 1

The impairment would be recorded as a loss of $25 million.

Step-by-step explanation:

The impairment would be recorded as a loss of $25 million.

When the fair value of an asset is less than its book value, it indicates that the asset has decreased in value. In this case, the fair value of Bonnaroo stages is estimated to be $5 million, which is $25 million lower than its book value of $30 million. Therefore, the impairment would be recorded as a loss of $25 million to reflect the decrease in value.