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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881

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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881
Textbook Problem
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(Appendix 7A) Impairment

Brown Industries had two machines that it believes may be impaired. Information on the machines is shown below.

Chapter 7, Problem 28CE, (Appendix 7A) Impairment Brown Industries had two machines that it believes may be impaired.

Required:

For each machine, determine if the machine impairment loss. is impaired. If so, calculate the amount of the impairment loss.

To determine

An Impairment of asset means permanent decline in future economic benefits or potential utility of an asset.

To calculate:

To determine if the machine is impaired and if so calculate the amount of impairment loss.

Explanation

Step 1- Impairment exists if the anticipated cash flow in the fore coming years from the asset is lower than the Book value of asset

Step 2: Impairment loss = Fair value- Book value of the assets

Hence,

Machine 1 is not impaired because its estimated future cash flows is more than its book value...

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