Oak Inc. has the following information regarding its assets: Book Value Estimated Undiscounted Cash Flows Fair Value Equipment $ 48,000 $ 43,000 $ 40,000 Building $ 81,000 $ 83,000 $ 78,000 Patent $ 43,000 $ 47,000 $ 45,000 What amount of loss should be recorded due to asset impairments

$8,000

Explanation:

Given that,

Equipment:

Book value = $48,000

Estimated Undiscounted Cash Flows = $43,000

Fair value = $40,000

Building:

Book value = $81,000

Estimated Undiscounted Cash Flows = $83,000

Fair value = $78,000

Patent:

Book value = $43,000

Estimated Undiscounted Cash Flows = $47,000

Fair value = $45,000

From the above information, we can conclude that only the equipment is impaired as it is the only asset whose estimated future cash flows are less than its book value.

The impairment loss obtained from the asset is determined as the difference between the fair value and the book value.

Amount of loss should be recorded due to asset impairments:

= Book value - Fair value

= $48,000 - $40,000

= $8,000

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