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4 March, 10:53

Mains Corporation owns equipment with a cost of $290,000 and accumulated depreciation at December 31, 2014 of $150,000. It is estimated that the machinery will generate future cash flows of $165,000. The machinery has a fair value of $115,000. Mains should recognize a loss on impairment of ... (a) $0. (b) $15,000. (c) $25,000. (d) $35,000.

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  1. 4 March, 14:12
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    (a) $0

    Explanation:

    Since the book value is less than the generated future cash flows so there would not be any loss on impairment of the asset

    The book value is computed below

    = Owns value - accumulated depreciation

    = $290,000 - $150,000

    = $140,000

    The book value is $140,000 and the generated cash flows are $165,000. So, no value would be recognized
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