Question 1

Silverstone Corp. has a machine with the following information at year-end:
- Original cost: $500,000
- Accumulated depreciation: $300,000
- Estimated undiscounted future cash flows: $180,000
- Fair value: $160,000
- Costs to sell: $10,000

Under ASC 360, what amount should Silverstone report for this machine on its balance sheet?

Accepted Answer

Apply ASC 360 two-step impairment test: (1) Recoverability - compare book value to undiscounted cash flows; if book value > cash flows, asset is impaired. (2) Measurement - impaired asset is written down to fair value (don't deduct costs to sell for held-and-used assets).

Question 2

What mistakes do candidates make on this CPA question?

Accepted Answer

Not recognizing impairment when recoverability test fails, using undiscounted cash flows for measurement, or deducting costs to sell for held-and-used assets

How to approach this question

Full Answer

Common mistakes

Practice the full CPA FAR Practice Exam 2

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