In Testing for Impairment of an Operational Asset,an Impairment Loss

question 21

Multiple Choice

In testing for impairment of an operational asset,an impairment loss is required if the:

• A)Asset's book value exceeds the present value of its expected future cash flows.
• B)Expected future cash flows exceeds the asset's book value.
• C)Present value of expected future cash flows exceeds its carrying value.
• D)Asset's book value exceeds the expected future cash flows.

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Definitions:

Deficit

A debit balance in the retained earnings account.

Retained Earnings

The portion of net earnings not distributed as dividends but retained by the company to reinvest in its core business or to pay debt.

Treasury Stock

Shares that were once issued and outstanding but were subsequently repurchased by the company, reducing the number of shares on the market.

Organizational Expenses

Costs related to the formation and operation of a business entity, such as legal fees, accounting services, and incorporation fees.