Business, 27.03.2020 18:07 ayri9893

Henry Co. manufactures DVD players. At the end of Year 1, Henry's management believes the growing popularity of streaming video content will reduce the demand for Henry's DVD players. The DVD players are manufactured using specialized equipment with a historical cost of $3,000,000 and accumulated depreciation of $1,520,000. The managers estimate the equipment has a remaining useful life of 4 years and will generate the following undiscounted cash flows:

Year 2 $ 540,000

Year 3 420,000

Year 4 190,000

Year 5 125,000

Salvage value 50,000

If the equipment were sold today, the sales price would be $1,600,000. Is the equipment considered impaired, why or why not?

Not impaired because the fair value of the equipment is greater than the carrying value of the asset by $120,000.

Yes impaired because undiscounted cash flow are lower than the carrying amount of the asset by $155,000.

Cannot determine impairment without discounted cash flows.

Yes impaired because the undiscounted cash flows are less than the fair value of the equipment by $275,000.

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Henry Co. manufactures DVD players. At the end of Year 1, Henry's management believes the growing po...

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