Wheaton Company Wheaton Company Owns an Apartment Building That Originally

Multiple Choice

Wheaton Company Wheaton Company owns an apartment building that originally cost $40 million and by the end of the current period has accumulated depreciation of $10 million, with net carrying value of $30 million.Wheaton Company had originally expected to collect rentals of $3.34 million each year for 30 years before selling the building for $16 million.Unanticipated placement of a new shopping center has caused Wheaton Company to reassess the future rentals.Wheaton Company expects the building to provide rentals for only 15 more years before Wheaton will sell it.Wheaton Company uses a discount rate of 8% per year in discounting expected rentals from the building.
Wheaton now expects to receive annual rentals of $1,200,000 per year for 15 years and to sell the building for $6.0 million after 15 years; these payments, in total, have a present value of $12.2 million when discounted at 8% per year.The building's fair value is $11.0 million today and costs to sell are $600,000.
Under U.S.GAAP, Wheaton would record the following entry

A) Accumulated Depreciation ........................... 11,000,000
Apartment Building (New Valuation) ....................10,000,000
Loss on Impairment................................. 19,000,000
Apartment Building (Acquisition Cost) ......................... 40,000,000

B) Accumulated Depreciation ........................... 10,000,000
Apartment Building (New Valuation) ....................10,000,000
Loss on Impairment................................. 20,000,000
Apartment Building (Acquisition Cost) ......................... 40,000,000

C) Accumulated Depreciation ........................... 10,000,000
Apartment Building (New Valuation) ...................11,000,000
Loss on Impairment................................. 19,000,000
Apartment Building (Acquisition Cost) ......................... 40,000,000

D) Accumulated Depreciation ........................... 10,000,000
Apartment Building (New Valuation) ...................12,000,000
Loss on Impairment................................. 18,000,000
Apartment Building (Acquisition Cost) ......................... 40,000,000

E) Accumulated Depreciation ........................... 10,000,000
Apartment Building (New Valuation) ...................12,200,000
Loss on Impairment................................. 17,800,000
Apartment Building (Acquisition Cost) ......................... 40,000,000