Reference no: EM132541039
Question - Harris Pilton Inc. purchased a noncurrent asset on January 1, 2015 costing $3,000,000, having an estimated useful life of eight years. This asset could be sold for a salvage value of $500,000. It is the company's policy to depreciate property, plant, and equipment on a straight-line basis. Management decided to conduct an impairment test of the asset on December 31, 2018. They estimated that it would generate future cash flows of $100,000, $80,000, $60,000, and $40,000 over the remaining four-year life of the asset. In addition, they found that the asset could be sold for a fair value of $200,000, but it would cost $50,000 to sell. Assume a 10% discount rate.
Instructions -
(a) Should the company recognize an impairment loss? Explain why.
(b) If yes, record the adjusting entry in the space below.
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