The demand for one of X Company's products has declined in recent years. The product is manufactured using designated equipment that originally cost $1,300,000 and has a carrying value of $720,000. As of the current date, December 31, 2018, it is expected that only an additional 400,000 units are likely to be sold over the remaining life of the equipment. Each unit sells for $3 and has a manufacturing cost of $1.50. Relevant information as of December 31, 2018: . The undiscounted future cash inflows from the sale of products over the life of the equipment is expected to be $600,000. . The present value of the future cash inflows from the sale of products over the life of the equipment, calculated at the company's cost of capital, is $475,000. The equipment has a fair value of $490,000 on the date of evaluation. How much of an impairment loss will X Company recognize in 2018? O $230,000 SO $120,000 $245,000
The demand for one of X Company's products has declined in recent years. The product is manufactured using designated equipment that originally cost $1,300,000 and has a carrying value of $720,000. As of the current date, December 31, 2018, it is expected that only an additional 400,000 units are likely to be sold over the remaining life of the equipment. Each unit sells for $3 and has a manufacturing cost of $1.50. Relevant information as of December 31, 2018: . The undiscounted future cash inflows from the sale of products over the life of the equipment is expected to be $600,000. . The present value of the future cash inflows from the sale of products over the life of the equipment, calculated at the company's cost of capital, is $475,000. The equipment has a fair value of $490,000 on the date of evaluation. How much of an impairment loss will X Company recognize in 2018? O $230,000 SO $120,000 $245,000
Managerial Accounting: The Cornerstone of Business Decision-Making
7th Edition
ISBN:9781337115773
Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Chapter8: Tactical Decision-making And Relevant Analysis
Section: Chapter Questions
Problem 54P
Related questions
Question
![13.
The demand for one of X Company's products has declined in recent years. The product is manufactured using designated equipment that
originally cost $1,300,000 and has a carrying value of $720,000. As of the current date, December 31, 2018, it is expected that only an additional
400,000 units are likely to be sold over the remaining life of the equipment. Each unit sells for $3 and has a manufacturing cost of $1.50. Relevant
information as of December 31, 2018:
. The undiscounted future cash inflows from the sale of products over the life of the equipment is expected to be $600.000.
. The present value of the future cash inflows from the sale of products over the life of the equipment, calculated at the company's cost of
capital, Is $475,000.
. The equipment has a fair value of $490,000 on the date of evaluation.
How much of an impairment loss will X Company recognize in 2018?
O $230,000
O so
O $120,000
$245,000](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F2d5f1d1f-780d-45ad-b52a-ed79b25cb346%2F63f853d3-58ba-458f-8315-c23f0c8bcab6%2Fhcrpe4q_processed.png&w=3840&q=75)
Transcribed Image Text:13.
The demand for one of X Company's products has declined in recent years. The product is manufactured using designated equipment that
originally cost $1,300,000 and has a carrying value of $720,000. As of the current date, December 31, 2018, it is expected that only an additional
400,000 units are likely to be sold over the remaining life of the equipment. Each unit sells for $3 and has a manufacturing cost of $1.50. Relevant
information as of December 31, 2018:
. The undiscounted future cash inflows from the sale of products over the life of the equipment is expected to be $600.000.
. The present value of the future cash inflows from the sale of products over the life of the equipment, calculated at the company's cost of
capital, Is $475,000.
. The equipment has a fair value of $490,000 on the date of evaluation.
How much of an impairment loss will X Company recognize in 2018?
O $230,000
O so
O $120,000
$245,000
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