On Jan 1, 2006, Green Company purchased a machine for $800,000 and established an annual depreciation charge of $100,000 over 8 yrs life. During 2009, after issuance of the 2008 financial statements, Green applied the recoverability test to the machine and concluded that: (1) the machine suffered permanent impairment of its operational value, and (2) $200,000 is a reasonable estimate of the amount expected to be recovered through use of the machine for the period Jan 1, 2009 to Dec 31, 2013. The fair value of the machine is $160,000. In Green’s Dec 31, 09 balance sheet, the machines should be reported at a carrying amount of

a.       0

b.      100,000

c.       160,000

d.      400,000

Well, i am kinda lost in the question...the correct answer is C. How so? THanks

Since the machine is permenantly impaired and new carrying value is $200,000, it will be depreciated on that value for next 5 yrs.

200,000/5 = 40,000

at the year end, the carrying value of the machine is 200,000 - 40,000 = 160,000. I think that's the logic.

Hope I m right ...

$200,000 is a reasonable estimate of the amount expected to be recovered through use of the machine for the period Jan 1, 2009 to Dec 31, 2013.

It says in the question........

i c...

by the way, if u remember the impairment rule for held for use, once the equipment/machine is impaired, the restoration is not permitted. Am i correct?? I thought the machine in this question is written down to zero and recovered $200,000 from 09-13 which is not premitted even. It looks like i still missed sth here...thx! I might mis-interpret the whole question .