(A) While Studying a Firm's Income Statement,you Notice the Line $\quad\quad\quad\$ 400,000$

question 73

Essay

(a) While studying a firm's income statement,you notice the line item: Amortization expense $\quad\quad\quad\$ 400,000$ Write a short report to a client of yours who is interested in providing a loan to this firm.In other words,what does the $400,000 amount mean,and perhaps more importantly,what does it not imply?
(b) Also,you come across the following line item: Impairment loss, property $\quad\quad\$ 600,000$ What does this amount represent,when is it recognized,what may have caused it,and how does it affect subsequent amortization,assuming that the property is not a total loss?

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Definitions:

Cash Equivalents

Short-term, highly liquid investments that are readily convertible to known amounts of cash and are subject to an insignificant risk of changes in value.

Bank Reconciliation

The process of matching the balances in an entity's accounting records for a cash account to the corresponding information on a bank statement.

Non-current Liability

A Non-current Liability is a financial obligation that a company does not expect to settle within the next twelve months from the reporting date.

Credit Balance

A situation where the total credits in an account exceed the total debits; it's common in liability, revenue, and equity accounts.