The Salamander Company Has Evaluated Its Receivables, and Has Identified

question 21

Multiple Choice

The Salamander Company has evaluated its receivables, and has identified the following possible impairments:

• Note #1 has recently deteriorated in credit quality. For Note #1, Salamander
estimates the present value of credit losses occurring in the next twelve months
is $50,000, and the present value of credit losses occurring after twelve months
is $20,000.
• Note #2 has not deteriorated in credit quality. For Note #2, Salamander estimates
the present value of credit losses occurring in the next twelve months is $5,000,
and the present value of credit losses occurring after twelve months is $10,000.

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If Salamander is reporting under ASU 2016-13 and therefore using the CECL model, it would recognize an impairment loss of:

• A) $50,000.
• B) $55,000.
• C) $75,000.
• D) $85,000.

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Definitions:

Rent Control

Government-imposed limits on the amount landlords can charge for renting out their property, often to make housing more affordable.

Tying

A sales strategy where the sale of one product (the tying product) is linked to the purchase of a second distinct product (the tied product).

High Demand

A situation in which the desire for a product or service significantly outweighs the supply available in the market.

Vertical Contracts

Agreements between companies at different levels in the supply chain, such as manufacturers and retailers, to specify conditions like pricing or product placement.