Reference no: EM132636807

Topeka Corporation uses special strapping equipment in its packaging business. The equipment was purchased at the beginning of 2010 for $800,000 and had an estimated useful life of 8 years with no salvage value. Topeka uses the straight-line depreciation method.
At the end of 2010, new technology was introduced that would accelerate the obsolescence of the equipment.

Topeka's controller gathered the following information:

Expected future cash flows $710,000
Value in use $675,000
Fair value $670,000
Selling costs $20,000

Question 1: Assume Topeka will continue to use the equipment and that it tests the asset for impairment under IFRS. Based on this test, which of the following statements is MOST correct?

There is no impairment.
There is an impairment loss in the amount of $25,000
There is an impairment loss in the amount of $35,000

Question 2: Assume Topeka will continue to use the equipment and that it tests the asset for impairment under GAAP. Based on this test, which of the following statements is MOST correct?

There is no impairment.
There is an impairment loss in the amount of $25,000
There is an impairment loss in the amount of $35,000