A company has some bottling equipment which cost $8.5 million, has a net book value of $4.1 million, estimated future cash flows of $3.7 million, and a fair value of $3.1 million. How much is the asset impairment loss? A. $5.4 million.

B. $4.1 million.

C. $0.4 million.

D. $1.0 million.

C. $0.4 million.

Explanation:

Impairment of an asset is the difference between the carry amount (NBV) of the asset and the higher of the value in use or the fair value less cost to sell. The value in use is the estimated future cash flow from the asset.

From the question

Net book value (NBV) = $4.1 million

Estimated future cash flows = $3.7 million

Fair value = $3.1 million

Higher of the value in use or the fair value = $3.7 million

Impairment = $4.1 million - $3.7 million

= $0.4 million