Fairfield Company determines the following information at year end about a piece of equipment that has a net book value of $75,000.Assume the equipment will not be for sale.
$\begin{array}{lccc}
\text { Present value of future expected net cash flows } & \$ 52,500 \
\text { Undiscounted future expected cash flows } & 63,500
\end{array}$

The impairment loss is
A)$22,500
B)$63,500
C)$15,500
D)$11,500
E)$52,500

Question

Fairfield Company determines the following information at year end about a piece of equipment that has a net book value of $75,000.Assume the equipment will not be for sale.
$\begin{array}{lccc}
  \text { Present value of future expected net cash flows } & \$ 52,500 \
 \text { Undiscounted future expected cash flows } & 63,500
\end{array}$

The impairment loss is
A)$22,500
B)$63,500
C)$15,500
D)$11,500
E)$52,500

Quizplus · Accepted Answer

Since the net book value of the equipment is $75,000 and the present value of future expected net cash flows is only $52,500, there is an impairment loss of $22,500 (75,000 - 52,500).

Fairfield Company Determines the Following Information at Year End About