US CMA Part 1 · Chapter 1 · Question 13 of 23
Under US GAAP, a long-lived asset held and used has a carrying amount of $800,000. Its estimated undiscounted future cash flows are $760,000 and its fair value is $610,000. What impairment loss should be recognized?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: D) $190,000
Explanation
Step 1 (recoverability): the undiscounted cash flows of $760,000 are less than the carrying amount of $800,000, so the asset is not recoverable. Step 2: the loss is measured as carrying amount minus fair value = $800,000 - $610,000 = $190,000.
More External Financial Reporting Decisions MCQs
- Q15Fenwick Corp has pretax financial income of $400,000, which includes $20,000 of tax-exempt municipal bond interest. Tax depreciation…
- Q16Which statement correctly describes lessee accounting under IFRS 16 compared with US GAAP (ASC 842)?
- Q17A lessee signs a five-year lease requiring annual payments of $50,000 at the end of each year. The rate implicit in the lease is 6%, and…
- Q18A company faces a lawsuit that it will probably lose. Its lawyers estimate the loss at between $200,000 and $600,000, with no amount in…
- Q19Under US GAAP, where are cash dividends paid to the company's own shareholders reported in the statement of cash flows?