E11-22 solution - EXERCISE 11-22(a Loss on Impairment 270,000 Accum 270,000 The recovery test indicates that an impairment has occurred since the

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EXERCISE 11-22 (a) December 31, 2008 Loss on Impairment. .................................. 270,000 Accum. Amortization—Equipment. . 270,000 The recovery test indicates that an impairment has occurred since the carrying value exceeds the future net cash flows. The loss in impairment is then calculated as follows: Cost $900,000 Accumulated amortization 400,000 Carrying amount 500,000 Fair value 230,000 Loss in 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. Recovery of any impairment loss is not permitted. (d) Management first has to determine whether there is an impairment. To evaluate this step, management does 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 (undiscounted) is less than the carrying amount
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This note was uploaded on 12/02/2011 for the course ECON eco200 taught by Professor Wolfson during the Spring '11 term at University of Toronto- Toronto.

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E11-22 solution - EXERCISE 11-22(a Loss on Impairment 270,000 Accum 270,000 The recovery test indicates that an impairment has occurred since the

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