Question

C-Stop reports the following information at year-end: Estimated Book Value Cash Flows Fair Value Building $ 500,000 $ 380,000 $ 360,000 Patent $ 35,000 $ 40,000 $ 38,000 Copyright $ 40,000 $ 38,000 $ 39,000 Machine $ 100,000 $ 120,000 $ 85,000 Based on the above information, what is the total amount of impairment loss that C-Stop should record at year-end?

Answer 1

Answer:

total amount of impairment loss: $139,,000

Explanation:

Given that:

                     Book value           Estimated cash flow       Fair value

Building       $ 500,000                $ 380,000                    $ 360,000

Patent         $ 35,000                   $ 40,000                       $ 38,000

Copyright    $ 40,000                  $ 38,000                       $ 39,000

Machine       $ 100,000                $ 120,000                     $ 85,000

The impairment loss happens when C-Stop corporation cash flow is less than it's book value.

As we can see that the estimated cash flow of copyright and building are less than the book value, so total amount of impairment loss:

($ 500,000   -  $ 360,000   ) - ($ 40,000-  $ 39,000  )

= $ 140,000 - $1,000

= $139,000

Hope it will find you well.