Larson Stores owns a small retail outlet in a California coastal town. In the last few years, a significant percentage of the residents have moved further inland after a number of landslides destroyed area homes. The building was purchased on January 1, 1990, at a cost $1,200,000. The building has been depreciated assuming a service life of 40 years, $300,000 salvage value. The company’s chief financial officer is concerned about impairment. A conservative estimate of future annual net cash flows is $60,000. Larson Stores uses 6% as a discount rate. An independent appraiser estimates the fair value of the property at $450,000. What is the recoverable cost of the property as of December 31, 2019? What should Larson Stores report as the impairment loss, if any in the 2020 financial statements? Select one: a. $441,605; $0 b. $441,605; $75,000 c. $600,000; $75,000 d. $60,000; $0 e. $60,000; $75,000 f. $600,000; $0
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Larson Stores owns a small retail outlet in a California coastal town. In the last few years, a significant percentage of the residents have moved further inland after a number of landslides destroyed area homes.
The building was purchased on January 1, 1990, at a cost $1,200,000. The building has been
The company’s chief financial officer is concerned about impairment. A conservative estimate of future annual net
What is the recoverable cost of the property as of December 31, 2019? What should Larson Stores report as the impairment loss, if any in the 2020 financial statements?
Select one:
a. $441,605; $0
b. $441,605; $75,000
c. $600,000; $75,000
d. $60,000; $0
e. $60,000; $75,000
f. $600,000; $0
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