Reference no: EM132820196

Problem 1: On January 2, Year 5, Clarinette Co. purchased assets for $400,000 that were to be depreciated over 5 years using the straight-line method with no salvage value. Taken together, these assets have identifiable cash flows that are largely independent of the cash flows of other asset groups. At the end of Year 6, Clarinette, as the result of certain changes in circumstances indicating that the carrying amount of these assets may not be recoverable, tested them for impairment. It estimated that it will receive net future cash inflows (undiscounted) of $100,000 as a result of continuing to hold and use these assets, which had a fair value of $80,000 at the end of Year 6. Thus, the impairment loss to be reported at December 31, Year 6, is

Option 1: $0
Option 2: $160,000
Option 3: $140,000
Option 4: $400,000