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Lilliput Boutique owns a small retail outlet in a California coastal town. In the last...

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Accounting

Lilliput Boutique owns a small retail outlet in a California coastal town. In the last few years, a significant percentage of the residents have moved further inland after a number of landslides destroyed area homes. The building was purchased on January 1,1990, at a cost $1,200,000. The building has been depreciated assuming a service life of 40 years, $300,000 salvage value.
The companys chief financial officer is concerned about impairment. A conservative estimate of future annual net cash flows is $60,000. Lilliput Boutique uses 6% as a discount rate. An independent appraiser estimates the fair value of the property at $450,000.
What is the recoverable cost of the property as of December 31,2019? State your answer with commas, without a dollar sign ($).
Incorrect answer:
450,000
Correct Answer:
600,000
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Based on answering incorrectly
Recoverable cost: $60,000 X remaining 10 years = $600,000

Answer & Explanation Solved by verified expert
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