Peppers Corporation Owns Machinery with a Book Value of $190,000

question 18

Multiple Choice

Peppers Corporation owns machinery with a book value of $190,000.It is estimated that the machinery will generate future cash flows of $200,000.The machinery has a fair value of $140,000.Peppers should recognize a loss on impairment of

• A)$ -0-.
• B)$10,000.
• C)$50,000.
• D)$60,000.

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Definitions:

Operations

The day-to-day activities involved in running a business that lead to the production of goods and services.

Variable Costing

An accounting method that only considers variable costs (costs that change with production levels) in product pricing and decision making, excluding fixed costs.

Absorption Costing

is an accounting method that includes all manufacturing costs - direct materials, direct labor, and both variable and fixed manufacturing overhead - in the cost of a product.

Fixed Manufacturing Overhead

Costs related to manufacturing that do not vary with the level of production, such as rent, salaries, and utility costs for the factory.