Question

Your company rents computers to local businesses and schools. You have 3,000 computers with a book value of $177,500. As a result of changing technology, your computers are more difficult to rent so you must drastically reduce your rental price, which causes a decrease in estimated future cash flows. The fair value of the computers is estimated to be $116,500 because of their outdated technology. Your company should report an asset impairment loss of:

Answer 1

The answer is $61,000

Step-by-step explanation:

An impairment loss is recognized when the carrying amount of an asset is less than its fair value(prevailing market price).

The difference between the carrying value and fair value is written off. Carrying amount is the cost of acquiring an asset minus any subsequent depreciation and impairment charges.

Impairment Loss = Book Value – Market Value

Impairment Loss = $177,500 - $116,500

Impairment loss is $61,000