Intermediate Accounting (2nd Edition)
2nd Edition
ISBN: 9780134730370
Author: Elizabeth A. Gordon, Jana S. Raedy, Alexander J. Sannella
Publisher: PEARSON
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Chapter 12, Problem 12.1MC
To determine
To identify: The correct option.
Given information:
Carrying cost is $1,000,000.
Current fair value is $800,000.
Remaining useful life is 20 year.
Net
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Lou Lou and Company purchased a piece of machinery 2 years ago for $50,000 and has depreciation to date of $15,000. The fair market value of the asset is $30,000, but the company believes it can achieve $34,000 in net future cash flows from the asset. Costs to dispose of the asset is $200. Assuming the asset is held for use, determine if the asset is impaired. If so, what is the amount of the write-off?
The asset is impaired and Lou Lou should record a $1,000 loss on impairment.
The asset is impaired and Lou Lou should record a $5,200 loss on impairment.
The asset is NOT impaired.
The asset is impaired and Lou Lou should record a $5,000 loss on impairment.
The Erley Equipment Company purchased a machine 5 years ago at a cost of $100,000. The machine had an expected life of 10 years at the time of purchase, and an expected salvage value of $10,000 at the end of the 10 years. It is being depreciated by the straight-line method toward a salvage value of $10,000, or by $9,000 per year. Anew machine can be purchased for $150,000, including installation costs. During its 5- year life, it will reduce cash operating expenses by $50,000 per year. Sales are not expected to change. At the end of its useful life, the machine is estimated to be worthless. MACRS depreciation will be used, and the machine will be depreciated over its 3-year class life rather than its 5-year economic life so the applicable depreciation rates are 33 percent, 45 percent, 15 percent, and 7 percent. The old machine can be sold today for $65,000. The firm’s tax rate is 35 percent. The appropriate discount rate is 16 percent.
d. What is the NPV of this project?
e.…
The Erley Equipment Company purchased a machine 5 years ago at a cost of $100,000. The machine had an expected life of 10 years at the time of purchase, and an expected salvage value of $10,000 at the end of the 10 years. It is being depreciated by the straight-line method toward a salvage value of $10,000, or by $9,000 per year. Anew machine can be purchased for $150,000, including installation costs. During its 5- year life, it will reduce cash operating expenses by $50,000 per year. Sales are not expected to change. At the end of its useful life, the machine is estimated to be worthless. MACRS depreciation will be used, and the machine will be depreciated over its 3-year class life rather than its 5-year economic life so the applicable depreciation rates are 33 percent, 45 percent, 15 percent, and 7 percent. The old machine can be sold today for $65,000. The firm’s tax rate is 35 percent. The appropriate discount rate is 16 percent.
a. If the new machine is purchased, what is…
Chapter 12 Solutions
Intermediate Accounting (2nd Edition)
Ch. 12 - Prob. 12.1QCh. 12 - Can firms group all property, plant, and equipment...Ch. 12 - Prob. 12.3QCh. 12 - Prob. 12.4QCh. 12 - Do firms follow the same steps for impairment...Ch. 12 - Prob. 12.6QCh. 12 - Prob. 12.7QCh. 12 - Prob. 12.8QCh. 12 - Under IFRS, if a firm recovers an impairment loss...Ch. 12 - Under IFRS, when do firms test plant assets and...
Ch. 12 - Prob. 12.11QCh. 12 - Prob. 12.12QCh. 12 - Prob. 12.1MCCh. 12 - Prob. 12.2MCCh. 12 - Prob. 12.3MCCh. 12 - Prob. 12.4MCCh. 12 - Prob. 12.5MCCh. 12 - Prob. 12.6MCCh. 12 - Prob. 12.1BECh. 12 - Prob. 12.2BECh. 12 - Prob. 12.3BECh. 12 - Prob. 12.4BECh. 12 - Indefinite-Life Intangible Asset Impairment....Ch. 12 - Prob. 12.6BECh. 12 - Prob. 12.7BECh. 12 - Prob. 12.8BECh. 12 - Prob. 12.9BECh. 12 - Prob. 12.10BECh. 12 - Impairment Reversal. IFRS. Perlu Products an IFRS...Ch. 12 - Prob. 12.12BECh. 12 - Prob. 12.13BECh. 12 - Prob. 12.14BECh. 12 - Prob. 12.15BECh. 12 - Prob. 12.16BECh. 12 - Prob. 12.17BECh. 12 - Prob. 12.18BECh. 12 - Prob. 12.19BECh. 12 - Prob. 12.20BECh. 12 - Prob. 12.21BECh. 12 - Prob. 12.22BECh. 12 - Prob. 12.23BECh. 12 - Tangible Asset Impairment. Henne Optical...Ch. 12 - Tangible Asset Impairment Loss. Use the same...Ch. 12 - Prob. 12.3ECh. 12 - Prob. 12.4ECh. 12 - Prob. 12.5ECh. 12 - Tangible Asset Impairment Loss, IFRS. Use the same...Ch. 12 - Prob. 12.7ECh. 12 - Prob. 12.8ECh. 12 - Prob. 12.9ECh. 12 - Assets Held for Disposal. Hattie Corporation...Ch. 12 - Prob. 12.11ECh. 12 - Asset Revaluation, Downwards, IFRS. Lousa Company...Ch. 12 - Tangible Asset Impairment. Chrispian Cookies, Inc....Ch. 12 - Prob. 12.2PCh. 12 - Tangible Asset Impairment. Using the same...Ch. 12 - Prob. 12.4PCh. 12 - Goodwill Impairment, Tangible Fixed Assets, and...Ch. 12 - Tangible Asset Impairment, Potential Reversal,...Ch. 12 - Prob. 12.7PCh. 12 - Prob. 12.8PCh. 12 - Prob. 12.9PCh. 12 - Comprehensive Asset Revaluation Problem (Initial...Ch. 12 - Prob. 12.11PCh. 12 - Judgment Case 1: Impairments of PPE under IFRS...Ch. 12 - Prob. 2JCCh. 12 - Prob. 3JCCh. 12 - Financial Statement Analysis Case 1: Long-Lived...Ch. 12 - Surfing the Standards Case 1: Impairments of PPE...Ch. 12 - Prob. 2SSCCh. 12 - Prob. 1BCCCh. 12 - Basis for Conclusions Case 2: Intangible Assets ...Ch. 12 - Basis for Conclusions Case 3: Goodwill Impairment...
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