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. 20% Estimated fair value $ 50% 30% (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. 458,581.)

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. 20% Estimated fair value $ 50% 30% (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. 458,581.)

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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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,…
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%
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.)
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?
(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…
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 0 decimal places, eg. 5,275. For calculation purposes, use 5 decimal places as displayed in the factor table provided.) Click here to…
On January 1, 2013, Porsche Company acquired the net assets of Saab Company for $450,500 cash. The fair value of Saab’s identifiable net assets was $374,980 on this date. Porsche Company decided to measure goodwill impairment using the present value of future cash flows to estimate the fair value of the reporting unit (Saab). The information for these subsequent years is as follows: Year Present Valueof Future Cash Flows Carrying Value ofSaab’s IdentifiableNet Assets* Fair ValueSaab’s IdentifiableNet Assets 2014 $400,620 $329,851 $339,983 2015 $399,230 $319,497 $345,596 2016 $350,150 $299,900 $325,360 * Identifiable net assets do not include goodwill. (a) For each year determine the amount of goodwill impairment, if any. 2014 2015 2016 Goodwill impairment $ $ $
Arca Salvage purchased equipment for $10,000. Arca recorded total depreciation of $8,000 on the equipment. Assume that Arca exchanged the old equipment for new equipment, paying $4,000 cash. The fair market value of the new equipment is $5,000. Journalize Arca's exchange of equipment. Assume this exchange has commercial substance. Let's begin by calculating the gain or loss on the exchange of equipment. (Enter a loss with a minus sign or parentheses.) Market value of assets received Less: Book value of asset exchanged Cash paid Gain or (Loss)
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?
On January 1, 2010, P Company acquired the net assets of S Company for $1,580,000 cash. The fair value of S Co. identifiable net assets was $1,310,000 on this date. P Company decided to measure goodwill impairment using the present value of future cash flows to estimate the fair value of the reporting unit (S Co.). The information for these subsequent years is as follows: Carrying value of SCo. Identifiable Net Assets $1,160,000 $1,120,000 Fair Value S Co. Identifiable Net Assets $1,190,000 $1,210,000 Present value of Future Cash Flows $1,390,000 $1,400,000 Year 2011 2012 * Identifiable net assets do not include goodwil.
On January 1, 2010, P Company acquired the net assets of S Company for $1,580,000 cash. The fair value of S Co. identifiable net assets was $1,310,000 on this date. P Company decided to measure goodwill impairment using the present value of future cash flows to estimate the fair value of the reporting unit (S Co.). The information for these subsequent years is as follows: Carrying value of S Co. Identifiable Net Assets $1,160,000 $1,120,000 Fair Value SCo. Identifiable Net Assets $1,190,000 $1,210,000 Present value of Future Cash Flows $1,390,000 $1,400,000 * Identifiable net assets do not include goodwill. Year 2011 2012 Choose the correct answer: In year 2011 S Company had: * Excess of fair value over carrying value of $30,000 Excess of carrying value over fair value of $30,000 Excess of fair value over carrying value of $40,000 Excess of carrying value over fair value of $40,000 None of the options is correct
Tamarisk Inc. owns equipment that cost $ 638,000 and has accumulated depreciation of $ 165,000. The expected future net cash flows from the use of the asset are expected to be $ 422,000. The fair value of the equipment is $ 365,000. Prepare the journal entry, if any, to record the impairment loss. (If no entry is required, select "No Entry" for the account titles and enter O for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.) Account Titles and Explanation Debit Credit