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JESTION 29 Fred's Bakery purchased new bakery equipment on January 1, 2018 for which it paid $90 million. Fred's Bakery uses straight-line depreciation with a
JESTION 29 Fred's Bakery purchased new bakery equipment on January 1, 2018 for which it paid $90 million. Fred's Bakery uses straight-line depreciation with a useful life of 5 years and residual value of $5 million for the bakery equipment. Due to the Gluten-free movement, people are buying less bread and the bakery equipment is operating at 50% of its capacity. As of December 31, 2019, Fred's management estimates the bakery equipment will generate undiscounted future cash flows of $53 million, and the equipment's fair value at December 31, 2019 is $49 million. Under these circumstances, how should Fred account for the equipment at December 31, 2019? The equipment is not impaired and no impairment loss is necessary Record a $1 million impairment loss Record a $3 million impairment loss Record a $7 million impairment loss Record a $5 million impairment loss QUESTION 30 mudinaludo
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