Harris Pilton Inc. purchased a noncurrent asset on January 1, 2012 costing $1,800,000, having an estimated useful life of six years. This asset could be sold for a salvage value of $180,000. It is the companys policy to depreciate property, plant, and equipment on a straight-line basis. Management decided to conduct an impairment test of the asset on December 31, 2014. They estimated that it would generate future cash flows of $200,000, $180,000, and $150,000 over the remaining three-year life of the asset. In addition, they found that the asset could be sold for a fair value of $1,105,000, but it would cost $35,000 to sell. Assume a 12% discount rate.

Instructions

Should the company recognize an impairment loss for this asset? If so, record the necessary adjusting entry.

Question 2

The Green Goat Company has the following inventory units at cost using FIFO and net realizable value.

Video Games	Cost	Net realizable value
Playstation games	$10,000	$12,000
Nintendo games	8,000	7,000
Xbox games	9,500	9,000
	$27,500

Instructions

1. Determine the final value of the inventory using the individual item approach and record an adjusting entry (if necessary).
2. The financial manager of the company believes that whether a company uses FIFO, LIFO, or Weighted Average, the firm should report its inventory at cost to present a more accurate value for its inventory. Briefly explain to the financial manager whether you agree or disagree with this statement and why?