Question
Madison Company acquired a depreciable asset at the beginning of Year 1 at a costof $12 million. At December 31, Year ,1 Madison gathered the
Madison Company acquired a depreciable asset at the beginning of Year 1 at a costof $12 million. At December 31, Year ,1 Madison gathered the following information related to this asset:
Carrying amount (net of accumulated depreciation). $10 million
Fair value of the asset (net selling price) . . . . $7.5 million
Sum of future cash flows from use of the asset . . . . . . . . $9 million
Present value of future cash flows from use of the asset $8 million
Remaining useful life of the asset 5 years
Required:
a. Determine the impact on Year 2 and Year 3 income from the depreciation and
possible impairment of this equipment under (1) I R S and (2) U.S. GAAP.
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