During December 2006, Bubba Inc. determined that there had been a significant decrease in the market value of its equipment used in its manufacturing process. At December 31, 2006, Bubba compiled the information below.
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Original cost of the equipment |
$500,000 |
|
Accumulated depreciation |
300,000 |
|
Expected net future cash inflows (undiscounted) related to the continued use and eventual disposal of the equipment |
175,000 |
|
Fair value of the equipment |
125,000 |
What is the amount of impairment loss that should be reported on Bubba’s income statement prepared for the year ended December 31, 2006?
- $ 75,000
- $ 25,000
- $325,000
- $375,000