Mains Corporation owns equipment with a cost of $290,000 and accumulated depreciation at December 31, 2014 of $150,000. It is estimated that the machinery will generate future cash flows of $165,000. The machinery has a fair value of $115,000. Mains should recognize a loss on impairment of ... (a) $0. (b) $15,000. (c) $25,000. (d) $35,000.

Question

Allyson Booker

Business

30 August, 06:06

Mains Corporation owns equipment with a cost of $290,000 and accumulated depreciation at December 31, 2014 of $150,000. It is estimated that the machinery will generate future cash flows of $165,000. The machinery has a fair value of $115,000. Mains should recognize a loss on impairment of ... (a) $0. (b) $15,000. (c) $25,000. (d) $35,000.

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Catalina Oneill · Answer 1

(a) $0

Explanation:

Since the book value is less than the generated future cash flows so there would not be any loss on impairment of the asset

The book value is computed below

= Owns value - accumulated depreciation

= $290,000 - $150,000

= $140,000

The book value is $140,000 and the generated cash flows are $165,000. So, no value would be recognized