Fryer Inc Owns Equipment for Which It Paid $90 Million

Multiple Choice

Fryer Inc. owns equipment for which it paid $90 million. At the end of 2009, it had accumulated depreciation on the equipment of $27 million. Due to adverse economic conditions, Fryer's management determined that it should assess whether an impairment should be recognized for the equipment. The estimated undiscounted future cash flows to be provided by the equipment total $60 million, and the equipment's fair value at that point is $40 million. Under these circumstances, Fryer:

A) Would record no impairment loss on the equipment.
B) Would record a $3 million impairment loss on the equipment.
C) Would record a $23 million impairment loss on the equipment.
D) None of these is correct.The book value exceeds the undiscounted cash flows, so an impairment is required.The fair value ($40 million) is $23 million less than the book value ($63 million) .