Your company rents out computers to local businesses and schools.You have 1,000 computers with a net book value of $160,000.As a result of changing technology,your computers are more difficult to rent so you must severely reduce your rental price,which causes a decrease in estimated future cash flows.The fair value of the computers is estimated to be $125,000 because of their outdated technology.Your company should report an asset impairment loss of:
A)$160,000.
B)$125,000.
C)$35,000.
D)$0

Question

Quizplus · Accepted Answer

The asset impairment loss should be calculated as the difference between the net book value and fair value. In this case, the loss would be $35,000 ($160,000 - $125,000). Therefore, the correct answer is C.

Your Company Rents Out Computers to Local Businesses and Schools