Leonard's Jewelry owns a patent with a carrying value of $50 million. Due to adverse economic conditions,

Leonard's Jewelry owns a patent with a carrying value of $50 million. Due to adverse economic conditions, Leonard's management determined that it should assess whether an impairment should be recognized for the patent. The estimated future cash flows to be provided by the patent total $43 million, and its fair value at that point totals $35 million. Under these circumstances, Leonard:

A) Would record no impairment loss on the patent.

B) Would record a $7 million impairment loss on the patent.

C) Would record a $15 million impairment loss on the patent.

D) Would record a $31 million impairment loss on the patent.

Answer: C

Wilson Inc. owns equipment for which it originally paid $70 million and has recorded accumulated depreciation on the equipment of $12 million. Due to adverse economic conditions, Wilson's management determined that it should assess whether an impairment should be recognized for the equipment. The estimated future cash flows to be provided by the equipment total $60 million, and its fair value at that point totals $50 million. Under these circumstances, Wilson:

A) Would record no impairment loss on the equipment.

B) Would record an $8 million impairment loss on the equipment.

C) Would record a $20 million impairment loss on the equipment.

D) Would record a $2 million impairment loss on the equipment.

Answer: A

C-Stop reports the following information at year-end:

Estimated

Book Value Cash Flows Fair Value

Building $ 500,000 $ 380,000 $ 360,000

Patent $ 35,000 $ 40,000 $ 38,000

Copyright $ 40,000 $ 38,000 $ 39,000

Machine $ 100,000 $ 120,000 $ 85,000

Based on the above information, what is the total amount of impairment loss that C-Stop should record at year-end?

A) $141,000.

B) $126,000.

C) $123,000.

D) $122,000.

Answer: A