Question

Collison and Ryder Company (C&R) has been experiencing declining market conditions for its sportswear division. Management decided to test the assets of the division for possible impairment. The test revealed the following: book value of division’s assets, $29.5 million; fair value of division’s assets, $22.5 million; sum of estimated future cash flows generated from the division’s assets, $30.2 million.

What amount of impairment loss should C&R recognize?

I am inputting $7,000,000 as the answer and it's saying that is wrong.

Answer 1

Answer- There is no impairment loss because the undiscounted sum of future cash flows of $30.2 million exceeds book value of division’s assets $29.5 million.