Fixed Assets Paper 4

1

Linx Corporation acquired equipment on January 1, year 3, for $100,000. The equipment had a ten-year useful life and no salvage value. On December 31, year 4, the following information was obtained regarding the equipment:
Expected value of undiscounted cash flows $72,000
Fair value estimated with in-use valuation premise $74,000
Fair value estimated with in-exchange valuation premise $70,000
What is the amount of impairment loss that Linx should report in its year 4 income statement?






2

Conner Corporation has equipment with a carrying value of $160,000 on December 31, year 4, after recording depreciation expense for year 4. The following information was available on December 31, year 4:
Value of similar equipment for sale in market $140,000
Present value of estimated future cash flows discounted at 10% $130,000
Estimated undiscounted cash flows of equipment $135,000
At what amount should the equipment be presented on the December 31, year 4 balance sheet?






3

Dahle Corporation has equipment with a carrying value of $450,000 on December 31, year 4. The following information was available on December 31, year 4:
Expected net cash flows (undiscounted) $420,000
Expected net cash flows discounted at 7% $400,000
Fair value, using the assets with other assets $415,000
Fair value, assuming the assets are sold standalone $428,000
What is the impairment loss that Dahle must report in its year 4 income statement for this equipment?






4

Under the reporting requirements for impaired assets, impairment losses for assets to be held and used shall be reported






5

During December year 4, Bubba Inc. determined that there had been a significant decrease in the market value of its equipment used in its manufacturing process. At December 31, year 4, Bubba compiled the information below.
Original cost of the equipment $500,000
Accumulated depreciation 300,000
Expected net future cash inflows (undiscounted) related to the continued use and eventual disposal of the equipment 175,000
Fair value of the equipment 125,000
What is the amount of impairment loss that should be reported on Bubbaís income statement prepared for the year ended December 31, year 4?






6

Marjorie, Inc. acquired a machine for $320,000 on August 31, year 1. The machine has a five-year life, a $50,000 salvage value, and was depreciated using the straight-line method. On May 31, year 4, a test for recoverability reveals that the expected net future undiscounted cash inflows related to the continued use and eventual disposal of the machine total $150,000. The machineís actual fair value on May 31, year 4, is $135,000, with no salvage value. Assuming a loss on impairment is recognized May 31, year 4, what is Marjorieís depreciation expense for June year 4?






7

Which of the following statements is(are) correct about the carrying amount of a long-lived asset after an impairment loss has been recognized? Assume the long-lived asset is being held for use in the business and that the asset is depreciable.
I. The reduced carrying amount of the asset may be increased in subsequent years if the impairment loss has been recovered.
II. The reduced carrying amount of the asset represents the amount that should be depreciated over the assetís remaining useful life.






8

According to ASC Topic 360, if a long-lived asset is determined to be impaired, how is the loss calculated?






9

In accordance with ASC Topic 360, long-lived assets are required to be reviewed for impairment






10

During December year 4, Toni Corp. determined that there had been a significant decrease in the market value of its equipment used in its roofing business. At December 31, year 4, Toni compiled the information below.
Original cost of equipment $800,000
Accumulated depreciation 450,000
Expected net future cash inflows (undiscounted) related to the continued use and eventual disposal of the equipment 300,000
Fair value of the equipment 250,000
What is the amount of the impairment loss that should be reported on Toniís income statement prepared for the year ended December 31, year 4?






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