THE FOLLOWING INFORMATION IS AVAILABLE FOR A COMPANY THAT PREPARES...

87. - MOCK AND SAMPLE EXAMS CFA LEVEL I MOCK EXAM MORNING VERSIONB QUESTIONS 2014
MOCK AND SAMPLE EXAMS CFA LEVEL I MOCK EXAM MORNING VERSIONB QUESTIONS 2014

87.

The following information is available for a company that prepares its financial statements in accordance with U.S. GAAP: 

It has production facilities with a net book value of $28.4 million. 

Recently, several other companies have entered the market, and the company now estimates that it will be able to generate cash flows of only $3 million per year for the next seven years with its facilities. 

The firm has a cost of capital of 10%. The impairment loss (in $ millions) on the production facilities will most likely be reported in the company’s financial statements as a: A. 7.4 reduction in the balance sheet carrying amount. B. 13.8 reduction in operating cash flows. C. 13.8 impairment loss on the income statement.