Question

Sheffield Corp. has equipment with a carrying amount of $2500000. The expected future net cash flows from the equipment are $2545000, and its fair value is $2036000. The equipment is expected to be used in operations in the future. What amount (if any) should Sheffield report as an impairment to its equipment?

Answer 1

Answer:

No impairment loss would be reported

Explanation:

The computation is shown below;

Impairment loss = carrying value - recoverable amount

Where,

The recoverable amount would be the higher amount of fair market value and value in use

So the recoverable amount would be $2,545,000

Now the impairment loss is

= $2,500,000 - $2,545,000

= -$45,000

Since the impairment loss comes in negative so no impairment would be recorded