Use the following information to answer the next (2) questions: Pitchfork, Inc. has the following...
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Accounting
Use the following information to answer the next (2) questions:
Pitchfork, Inc. has the following equipment reported on their year-end balance sheet at December 31, 20x1. Conditions warrant that it be reviewed for potential impairment. Use the following information to answer the next (2) questions:
Asset
Classification
Purchase Price
Accumulated Depreciation
Expected Future Cash Flows
(undiscounted)
Fair Value
Remaining Useful Life
Equip FJ-670
Operating
Asset continue in use
$1,200,000
$541,500
$120,000/year
$595,000
6 years
1. Assume Pitchfork complies with U.S. GAAP reporting standards. Determine the amount of the impairment loss (if any):
2. Assume instead that Pitchfork follows IFRS reporting standards. Determine the impairment loss for Equipment FJ-670 (if any). Assume Pitchfork determines a discount rate of 8% is appropriate to find the present value of the cash flows for this asset. The PVOA (8%, 6n) is 4.6229. Pitchfork does not anticipate any salvage value. Additionally, the company estimates a cost to sell for the asset is equal to 5% of its Fair Value. Impairment Loss:
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