Culver Company owns specialized equipment that was purchased in an acquisition of Riding Company. The equipment has a book value of $1,560,000, but according to IFRS it is assessed for impairment on an annual basis. To perform this impairment test, Culver must estimate the fair value of the equipment. It has developed the following cash flow estimates related to the equipment based on internal information. Each cash flow estimate reflects Culver's estimate of annual cash flows over the next 7 years. The equipment is assumed to have no residual value after the 7 years. (Assume the cash flows occur at the end of each year.) Year Cash Flow Estimate 1-3 4-6 7 $208,000 316,000 368,000 Culver determines, using its own assumptions, that the appropriate discount rate for this estimation is 6%. What is the estimated fair value of the equipment? (Round answer to O decimal places, eg. 5,275, For calculation purposes, use 5 decimal places as displayed in the foctor toble provided.) Click here to view Table A.2-PRESENT VALUE OF 1-(PRESENT VALUE OF A SINGLE SUM) Click here to view Table A4-PRESENT VALUE OF AN ORDINARY ANNUITY OF 1 Estimated fair value of the equipment 1678214

Culver Company owns specialized equipment that was purchased in an acquisition of Riding Company. The equipment has a book value of $1,560,000, but according to IFRS it is assessed for impairment on an annual basis. To perform this impairment test, Culver must estimate the fair value of the equipment. It has developed the following cash flow estimates related to the equipment based on internal information. Each cash flow estimate reflects Culver's estimate of annual cash flows over the next 7 years. The equipment is assumed to have no residual value after the 7 years. (Assume the cash flows occur at the end of each year.) Year Cash Flow Estimate 1-3 4-6 7 $208,000 316,000 368,000 Culver determines, using its own assumptions, that the appropriate discount rate for this estimation is 6%. What is the estimated fair value of the equipment? (Round answer to O decimal places, eg. 5,275, For calculation purposes, use 5 decimal places as displayed in the foctor toble provided.) Click here to view Table A.2-PRESENT VALUE OF 1-(PRESENT VALUE OF A SINGLE SUM) Click here to view Table A4-PRESENT VALUE OF AN ORDINARY ANNUITY OF 1 Estimated fair value of the equipment 1678214

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

Crane Company owns a trade name that was purchased in an acquisition of Wildhorse Co.. The trade name has a book value of $2200000, but according to IFRS, it is assessed for impairment on an annual basis. To perform this impairment test, Crane must estimate the fair value of the trade name. It has developed the following cash flow estimates related to the trade name based on internal information. Each cash flow estimate reflects Crane's estimate of annual cash flows over the next 7 years. The trade name is assumed to have no residual value after the 7 years. (Assume the cash flows occur at the end of each year.) Probability Assessment Cash Flow Estimate 30% $250000 50% 360000 20% 450000 Crane determines that the appropriate discount rate for this estimation is 7%. To the nearest dollar, what is the estimated fair value of the trade name?
Kingbird Company owns a trade name that was purchased in an acquisition of McClellan Company. The trade name has a book value of $3,500,000, but according to GAAP, it is assessed for impairment on an annual basis. To perform this impairment test, Kingbird must estimate the fair value of the trade name. It has developed the following cash flow estimates related to the trade name based on internal information. Each cash flow estimate reflects Kingbird's estimate of annual cash flows over the next 10 years. The trade name is assumed to have no salvage value after the 10 years. (Assume the cash flows occur at the end of each year.) Cash Flow Estimate $374,100 631,400 759,600 Probability Assessment Click here to view factor tables. Estimated fair value 20% LA 50% (a) What is the estimated fair value of the trade name? Kingbird determines that the appropriate discount rate for this estimation is 10%. (Round factor values to 5 decimal places, e.g. 1.25124 and final answer to 0 decimal places,…
Headland Company owns a trade name that was purchased in an acquisition of McClellan Company. The trade name has a book value of $3,500,000, but according to GAAP, it is assessed for impairment on an annual basis. To perform this impairment test, Headland must estimate the fair value of the trade name. It has developed the following cash flow estimates related to the trade name based on internal information. Each cash flow estimate reflects Headland's estimate of annual cash flows over the next 9 years. The trade name is assumed to have no salvage value after the 9 years. (Assume the cash flows occur at the end of each year.) Cash Flow Estimate $380,600 646,900 768,300 Probability Assessment Click here to view factor tables. Estimated fair value $ LA 20% (a) What is the estimated fair value of the trade name? Headland determines that the appropriate discount rate for this estimation is 9%. (Round factor values to 5 decimal places, e.g. 1.25124 and final answer to 0 decimal places, e.g.…
Blue Company owns a trade name that was purchased in an acquisition of McClellan Company. The trade name has a book value of $3,500,000, but according to GAAP, it is assessed for impairment on an annual basis. To perform this impairment test, Blue must estimate the fair value of the trade name. It has developed the following cash flow estimates related to the trade name based on internal information. Each cash flow estimate reflects Blue's estimate of annual cash flows over the next 9 years. The trade name is assumed to have no salvage value after the 9 years. (Assume the cash flows occur at the end of each year.) Cash Flow Estimate $382.500 646,400 769,700 Probability Assessment Click here to view factor tables. Estimated fair value 20% $ 50% (a) What is the estimated fair value of the trade name? Blue determines that the appropriate discount rate for this estimation is 9%. (Round factor values to 5 decimal places, e.g. 1.25124 and final answer to O decimal places, e.g. 458,581.) 30%
(Fair Value Estimate) Killroy Company owns a trade name that was purchased in an acquisition of McClellan Company. The trade name has a book value of $3,500,000, but according to GAAP, it is assessed for impairment on an annual basis. To perform this impairment test, Killroy must estimate the fair value of the trade name. (You will learn more about intangible asset impairments in Chapter 12.) It has developed the following cash flow estimates related to the trade name based on internal information. Each cash flow estimate reflects Killroy’s estimate of annual cash flows over the next 8 years. The trade name is assumed to have no salvage value after the 8 years. (Assume the cash flows occur atthe end of each year.) Cash Flow Estimate Probability Assessment $380,000 20% 630,000 50% 750,000 30% Instructions(a) What is the estimated fair value of the trade name? Killroy determines that the appropriate discount rate for this estimation is 8%.(b) Is the estimate developed for…
Carla Company owns a trade name that was purchased in an acquisition of McClellan Company. The trade name has a book value of $3,500,000, but according to GAAP, it is assessed for impairment on an annual basis. To perform this impairment test, Carla must estimate the fair value of the trade name. It has developed the following cash flow estimates related to the trade name based on internal information. Each cash flow estimate reflects Carla's estimate of annual cash flows over the next 9 years. The trade name is assumed to have no salvage value after the 9 years. (Assume the cash flows occur at the end of each year.) Cash Flow Estimate $381,100 649,200 759,600 Probability Assessment Click here to view factor tables 20% 50% 30% (a) What is the estimated fair value of the trade name? Carla determines that the appropriate discount rate for this estimation is 9%. (Round factor values to 5 decimal places, e.g. 1.25124 and final answer to O decimal places, e.g. 458,581.)
Skysong Company owns a trade name that was purchased in an acquisition of McClellan Company. The trade name has a book value of $3,500,000, but according to GAAP, it is assessed for impairment on an annual basis. To perform this impairment test, Skysong must estimate the fair value of the trade name. It has developed the following cash flow estimates related to the trade name based on internal information. Each cash flow estimate reflects Skysong's estimate of annual cash flows over the next 11 years. The trade name is assumed to have no salvage value after the 11 years. (Assume the cash flows occur at the end of each year.) Cash Flow Estimate $378,900 646,700 754,000 Probability Assessment Click here to view factor tables Estimated fair value 20% 50% 30% (a) What is the estimated fair value of the trade name? Skysong determines that the appropriate discount rate for this estimation is 11%. (Round factor values to 5 decimal places, e.g. 1.25124 and final answer to 0 decimal places,…
Gates Inc., a calendar year firm, currently uses a plant asset in operations that originally cost $110,000 and has a useful life of eight years and a $10,000 residual value. Gates uses the straight line depreciation method. As an impairment indicator was present, Gates reviewed the asset for impairment. At January 1 of the current year, which is the beginning of the asset's third year of useful life, total remaining cash inflows attributable to the asset are estimated to be $120,000, while total cash outflows in running and maintaining the machine are estimated to be $65,000, Based on quoted prices and the condition of the asset, Gates estimates the fair value of the asset to be $40.000. The cost to sell the asset is approximately $5,000. Gates plans to continue to use the asset in production, although at a much lower rate of utilization. Required a. Record the impairment loss on January 1 of the current year, Date Jan 1 Account Name Date Dec 31 To record met Dr. b. Record depreciation…
Blake Corporation has determined that one of its machines has experienced an impairment in value. However, the company expects to continue to use the asset for another 3 full years because no active market exists for this machine. Selected information on the impaired asset (on the date that impairment was determined to exist) is provided below. Original cost of the machine $22,000 Carrying amount of the machine 20, 000 Undiscounted future cash flows expected to be generated by the machine 15,000 Fair value of the machine (determined by calculating the present value of the future cash flows expected to be generated by the machine) 12,000 What is the amount of the impairment loss to be recorded by Blake? $3,000 $5,000 $7,000 $8,000
Toro Co. has equipment with a carrying amount of$700,000. The expected future net cash flows from theequipment are $705,000, and its fair value is $590,000.The equipment is expected to be used in operations inthe future. What amount (if any) should Toro report asan impairment to its equipment?
Jethro Inc. is reviewing its intangible assets for impairment. The accounting team has received the following information on the assets' book value, annual cash flows and fair values: Asset Carrying value Estimated selling Remaining useful life Annual expected cash flows price Patent #1 $80,000 $8,000 $70,000 8 years 15 years Patent #2 $180,000 $15,000 $175,000 License $50,000 Indefinite $ 2,000 $35,000 Selling costs of any intangible asset is expected to be negligible. The company's internal rate of return (IRR) is 5% Required: Test each of the intangible assets for impairment. If the asset is impaired, record impairment. (a) Assuming the company uses ASPE's cost recovery impairment model; and (b) Assuming the company uses IFRS's rational entity impairment model (for the PV of an asset with unlimited life, set n to a very large value like 1000 or the highest value on the annuity table)
On December 31, Year 1, Brown Brothers purchased machine A for $770,000 and machine B for $300,000. The machines are depreciated on the straight-line basis over 10 years with no salvage value. Brown reviews its assets for impairment annually. While doing the U.S. GAAP impairment analysis at year-end of Year 6, Brown determines that the expected future cash flows are $70,000 per year from machine A and $40,000 per year from machine B over the remaining lives of the assets. At December 31, Year 6, the fair values of machines A and B are $300,000 and $180,000, respectively. What amount of impairment loss should Brown report on its Year 6 income statement under U.S. GAAP? O A. $50,000 B. $85,000 O C. $35,000 OD. $0