Torque Co. has equipment with a carrying amount of $1,600,000. The expected future net cash flows from the equipment are $1,630,000, and its fair value is $1,360,000. The equipment is expected to be used in operations in the future. What amount (if any) should Torque report as an impairment to its equipment?

Question

Business

Jimena Meza

1 September, 17:15

Torque Co. has equipment with a carrying amount of $1,600,000. The expected future net cash flows from the equipment are $1,630,000, and its fair value is $1,360,000. The equipment is expected to be used in operations in the future. What amount (if any) should Torque report as an impairment to its equipment?

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Katie Andrade · Answer 1

Value of impairment loss = $240,000

Explanation:

Provided information,

Carrying amount of equipment = $1,600,000

Expected future cash flows = $1,630,000

Fair value of cash flows = $1,360,000

Impairment loss is the value of loss which arises due to the difference in amount of carrying value in the books and the fair value where the amount of carrying value is more than fair value.

Here,

Fair value is less than carrying value by $1,600,000 - $1,360,000 = $240,000

Therefore, value of impairment loss = $240,000