E-11-18 - Management completes a recoverability test The recoverability test estimates the future cash flows expected from use of that asset and

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E11-18 (a) December 31, 2007 Loss on Impairment 270,000 Accumulated Depreciation—Equipment 270,000 Cost $900,000 Accumulated depreciation 400,000 Carrying amount 500,000 Fair value 230,000 Loss on impairment $270,000 (b) It may be reported in the other expenses and losses section or it may be highlighted as an unusual item in a separate section. It is not reported as an extraordinary item. (c) No entry necessary. Restoration of any impairment loss is not permitted. (d) Management had to determine whether there was impairment.
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Unformatted text preview: Management completes a recoverability test. The recoverability test estimates the future cash flows expected from use of that asset and its eventual disposition. If the sum of the expected future net cash flows is less than the carrying amount of the asset, an impairment results. If the recoverability test indicates that impairment has occurred, a loss is computed. The impairment loss is the amount by which the carrying amount of the asset exceeds its fair value....
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This note was uploaded on 12/01/2010 for the course ACCT 55 taught by Professor Smith during the Spring '10 term at Auckland.

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