Intermediate Accounting
3rd Edition
ISBN: 9780136912644
Author: Elizabeth A. Gordon; Jana S. Raedy; Alexander J. Sannella
Publisher: Pearson Education (US)
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Textbook Question
Chapter 12, Problem 12.1E
Tangible Asset Impairment. Henne Optical Corporation reported the following information regarding long-term operating assets for its Lens Manufacturing Operations:
| Description | Canning Value | Estimated Fair Value |
| Factory building (used in several segments) | $10,000,000 | |
| Less: |
(4,500,000) | |
| Net book value | $ 5,500,000 | $ 8,900,000 |
| Land | $ 7,000,000 | $14,000,000 |
| Lens manufacturing equipment | $ 2,100,000 | |
| Less: Accumulated depreciation | (600,000) | |
| Net book value | $ 1,500,000 | $ 1,100,000 |
| Lens polishing equipment | $ 3,000,000 | |
| Less: Accumulated depreciation | (1,200,000) | |
| Net book value | $1,800,000 | $ 1,625,000 |
| General factory equipment (used in several segments) | $6,500,000 | |
| Less: Accumulated depreciation | (4,000,000) | |
| Net book value | $ 2,500,000 | $ 2.400.000 |
| Delivery trucks (used in several segments) | $ 1,750,000 | |
| Less: Accumulated depreciation | (300,000) | |
| Net book value | $1,450,000 | $ 1,125,000 |
| Total net fixed assets | $19,750,000 |
Recent advances in technology have rendered the company’s lens manufacturing operations nearly obsolete. Management projects the following future
| Future Period | Cash-Flow Projection |
| Year 1 | $1,200,000 |
| Year 2 | 750,000 |
| Year 3 | 400,000 |
| Year 4 | 350,000 |
| Year 5 | 300,000 |
| Total | $3,000,000 |
Required
- a. Determine the asset group for purposes of impairment testing and justify your decision.
- b. Compute the impairment loss for the asset group identified in part (a) for the current year, if any.
- c. Prepare the
journal entry to record the impairment loss, if needed.
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Presented below is information related to Wolfie Corp.’s equipment on 12/31/2022:
Description
Amount
Capitalized cost
$900,000
Accumulated depreciation to date
750,000
Estimated residual value
40,000
Expected future cash flows
125,000
Estimated Fair value
100,000
The amount of the impairment loss, if any, that Wolfie Corp. should record on 12/31/22 is:
$45,000
$50,000
$10,000
$20,000
$25,000
There is no impairment.
During the current accounting period, Jack Ltd considered the recognition of the following costs as intangible assets.
GHS 40,000 spent on evaluating research findings
GHS 60,000 spent on acquiring a brand name from a competitor
GHS 50,000 spent on acquiring the legal rights to a production process, without which Jack Ltd’s business cannot function
In accordance with IAS 38 Intangible Assets, what is the maximum amount that Jack Ltd could recognize as intangible assets?
An asset group is being evaluated for an impairment loss. The following financial information is available
for the asset group:
Carrying
Value=100,000,000
Sum of the undiscounted cash flows= 95,000,000
Fair value= 80,000,000
Carrying Value= $100,000,000
What is the value of the impairment loss?
Chapter 12 Solutions
Intermediate Accounting
Ch. 12 - Prob. 12.1QCh. 12 - Can firms group all property, plant, and equipment...Ch. 12 - Prob. 12.3QCh. 12 - Prob. 12.4QCh. 12 - Do firms follow the same steps for impairment...Ch. 12 - Prob. 12.6QCh. 12 - Prob. 12.7QCh. 12 - Prob. 12.8QCh. 12 - Under IFRS, if a firm recovers an impairment loss...Ch. 12 - Under IFRS, when do firms test plant assets and...
Ch. 12 - Prob. 12.11QCh. 12 - Prob. 12.12QCh. 12 - Prob. 12.1MCCh. 12 - Prob. 12.2MCCh. 12 - Prob. 12.3MCCh. 12 - Prob. 12.4MCCh. 12 - Prob. 12.5MCCh. 12 - Prob. 12.6MCCh. 12 - Prob. 12.1BECh. 12 - Prob. 12.2BECh. 12 - Prob. 12.3BECh. 12 - Prob. 12.4BECh. 12 - Indefinite-Life Intangible Asset Impairment....Ch. 12 - Prob. 12.6BECh. 12 - Prob. 12.7BECh. 12 - Prob. 12.8BECh. 12 - Prob. 12.9BECh. 12 - Prob. 12.10BECh. 12 - Prob. 12.11BECh. 12 - Prob. 12.12BECh. 12 - Prob. 12.13BECh. 12 - Prob. 12.14BECh. 12 - Prob. 12.15BECh. 12 - Prob. 12.16BECh. 12 - Prob. 12.17BECh. 12 - Prob. 12.18BECh. 12 - Prob. 12.19BECh. 12 - Prob. 12.20BECh. 12 - Prob. 12.21BECh. 12 - Prob. 12.22BECh. 12 - Prob. 12.23BECh. 12 - Tangible Asset Impairment. Henne Optical...Ch. 12 - Tangible Asset Impairment Loss. Use the same...Ch. 12 - Prob. 12.3ECh. 12 - Prob. 12.4ECh. 12 - Prob. 12.5ECh. 12 - Tangible Asset Impairment Loss, IFRS. Use the same...Ch. 12 - Prob. 12.7ECh. 12 - Prob. 12.8ECh. 12 - Prob. 12.9ECh. 12 - Assets Held for Disposal. Hattie Corporation...Ch. 12 - Prob. 12.11ECh. 12 - Asset Revaluation, Downwards, IFRS. Lousa Company...Ch. 12 - Tangible Asset Impairment. Chrispian Cookies, Inc....Ch. 12 - Prob. 12.2PCh. 12 - Tangible Asset Impairment. Using the same...Ch. 12 - Prob. 12.4PCh. 12 - Goodwill Impairment, Tangible Fixed Assets, and...Ch. 12 - Tangible Asset Impairment, Potential Reversal,...Ch. 12 - Prob. 12.7PCh. 12 - Prob. 12.8PCh. 12 - Prob. 12.9PCh. 12 - Comprehensive Asset Revaluation Problem (Initial...Ch. 12 - Prob. 12.11PCh. 12 - Judgment Case 1: Impairments of PPE under IFRS...Ch. 12 - Prob. 2JCCh. 12 - Prob. 3JCCh. 12 - Financial Statement Analysis Case 1: Long-Lived...Ch. 12 - Surfing the Standards Case 1: Impairments of PPE...Ch. 12 - Prob. 2SSCCh. 12 - Prob. 1BCCCh. 12 - Basis for Conclusions Case 2: Intangible Assets ...Ch. 12 - Basis for Conclusions Case 3: Goodwill Impairment...
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Asset impairment explained; Author: The Finance Storyteller;https://www.youtube.com/watch?v=lWMDdtHF4ZU;License: Standard Youtube License