Would love people’s thoughts on the reasoning for this one… A company has an asset with the following characteristics: Net book value of $500,000 (original cost of$1,300,000 less accumulated depreciation of $800,000). • Undiscounted expected future cash flows of $470,000. • Present value of expected future cash flows of $380,000. Which of the following statements about the accounting treatment of this asset is least accurate? A. The asset is deemed to be “impaired,” because the present value of expected future cash flows is less than the carrying value. B. The future impact of an impairment recognition is to increase net income, asset turnover ratios, and leverage ratios. C. If an impairment is recognized, the company will report a $120,000 write-off in income from continuing operations. D. The indicators of impairment include negative changes in the business climate, large cost overruns, and a change in the use of the asset. Also if anyone happens to have the worked answers to schweser book 6, I would appreciate if you could send to jamescox00 at gmail.com Thanks
A the asset is deemed impared when the UNDISCOUNTED value is less than the carrying value
then as to the LEVEL of impairment write donw its Carrying value-Discounted cash flows
Answer is C. Discounted CF - NBV120 which is the amount that recognised in income statement.
answer was A…
A. Undiscounted Cash Flow