Wave Crest Hotels is located in Canada but manages an extensive network of boutique hotels in the United States. Wave Crest has significant receivables from 3 customers,$480,000 due from Stephanie Inn, $900,000 due from Warren House, and $760,000 due from Hallmark Hotels. Wave Crest has other receivables totaling $440,000.

Wave Crest determines that the Warren House receivable is impaired by $160,000 and the Hallmark Hotels receivable is impaired by $200,000. The receivable from the Stephanie Inn is not considered impaired. Wave Crest determines that a composite rate of 5% is appropriate to measure impairment on all other receivables. What is the total impairment of receivables for Wave Crest for 2011?

a.$382,000

b.$314,000

c.$406,000

d.$360,000

The answer key I have says 406,000 is correct, but I don't understand why.