Question

Alou Corporation reported the following information at year-end: Book Value Estimated Cash Flows Fair Value Building $ 578,000 $ 398,000 $ 387,000 Patent $ 53,000 $ 58,000 $ 50,000 Copyright $ 58,000 $ 56,000 $ 53,000 Machine $ 118,000 $ 138,000 $ 94,000 Based on the above information, what is the total amount of impairment loss that Alou should record at year-end?

Answer 1

Answer:

Total amount of impairment is  $196,000

Explanation:

Given Data;

The question can be tabulated for easy understanding.

                      Book value           Estimated cash flow       Fair value

Building        $ 578,000                $ 398,000                    $ 387,000

Patent           $ 53,000                  $ 58,000                      $ 50,000

Copyright        $ 58,000                 $ 56,000                    $ 53,000

Machine          $ 118,000               $ 138,000                     $ 94,000

Total impairment loss = ?

If the estimated cash flow in Alou corporation is less than it's book value, then an impairment lost has occurred.

From the question given, the estimated cash flow of copyright and building are less than the book value. Therefore,

Total impairment loss = (578,000-387,000) + ( 58,000-53,000)

                                    = 191000+ 5000

                                    = $196,000