Question
On August 1, 2020, a copper mining company acquired and installed a new rock crusher for $25,000,000. The crusher is used in the mine to
On August 1, 2020, a copper mining company acquired and installed a new rock crusher for $25,000,000. The crusher is used in the mine to aid in the excavation of ore. At the time of installation, management estimates that the crusher will be used for 8 years, help to mine 3 million tons of ore, and have a residual value of $1,000,000. The company has a December 31 fiscal year end.
The mines actual production through 2022 was as follows:
Year Tons of ore mined
2020 150,000
2021 400,000
2022 350,000
- [IMPAIRMENT] Assume that on January 1, 2024 the mining company management determined that circumstances indicate a possible impairment of the mining operation (the assets, including the crusher, are grouped at the level of the mine for the purpose of impairment testing). The following information relates to the asset group on 12/31/2024.
Net Book value (Carrying value) $105,000,000
Undiscounted sum of future cash flows $95,000,000
Fair value $94,000,000
What is the amount of impairment loss that the mining company should record in 2024, if any? Show your work.
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Financial Accounting Preparing Financial Statements Study Text
Authors: Kaplan
1st Edition
9781839965685
