FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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- 1. MadDog Inc. owns equipment for which it paid $85 million. At the end of 2020, it had accumulated depreciation on the equipment of $15 million. Due to adverse economic conditions, MadDog's management determined that it should assess whether an impairment loss should be recognized for the equipment. The estimated undiscounted future cash flows to be provided by the equipment total $55 million, and the equipment's fair value at that point is $40 million. a. Under these circumstances, determine if MadDog should record an impairment loss and if yes, in what amount. Clearly indicate the steps that led to your conclusion. b. Make the necessary journal entry to record the impairment loss. If you determined that no entry is necessary, write "No entry". c. How would your answer change if the estimated undiscounted future cash flows to be provided by the equipment total $85 million instead of $55 million?arrow_forwardWinn Company exchanged an old machine having a carrying amount of P16,800, and paid a cash difference of P6,000 for a new machine having a total cash price of P20,500. The cash flows from the new machine are expected to be significantly different than the cash flows from the old machine. What amount of loss should Winn recognize on this exchange?arrow_forwardok D ences General Optic Corporation operates a manufacturing plant in Arizona. Due to a significant decline in demand for the product manufactured at the Arizona site, an impairment test is deemed appropriate. Management has acquired the following information for the assets at the plant Cost Accumulated depreciation General's estimate of the total cash flows to be generated by selling the products manufactured at its Arizona plant, not discounted to present value The fair value of the Arizona plant is estimated to be $14 million. Required: 1. Determine the amount of impairment loss. 2. If a loss is indicated, prepare the entry to record the loss. 3. & 4. Determine the amount of impairment loss assuming that the estimated undiscounted sum of future cash flows is (3) $15 million instead of $16.2 million and (4) $24.35 million instead of $16.2 million. Complete this question by entering your answers in the tabs below. Req 1 Req 2 Impairment loss Req 3 and 4 Determine the amount of…arrow_forward
- Ayayai Corp., a mining company, owns a significant mineral deposit in a northern territory. Ayayai prepares financial statements in accordance with IFRS. Included in the asset is a road system that was constructed to give company personnel access to the mineral deposit for maintenance and mining activity. The road system cannot be sold separately and separate cash flow information is not available for it. The carrying amounts of two cash-generating units of the mine at June 30, 2023, are as follows: Machinery Mine in the development phase The machinery's value in use has been assessed at $4,500,000 while the fair value less costs to sell is $3,800,000. With respect to the mine, the value in use is $8,000,000 while fair value less costs to sell is $8,200,000. $4,000,000 $8,350,000 (b) Determine if the machinery and the mine are impaired and prepare the journal entries, if any, to record the impairment at June 30, 2023. (Credit account titles are automatically indented when the amount is…arrow_forwardA cash-generating unit comprises the following assets: £000 Goodwill Land Plant and equipment Select one: a. £2,285,716 b. £2,400,000 O c. £300,000 O d. e. 440 £2,021,052 £2,111,472 2,560 One of the pieces of equipment, carried at £160,000, is damaged and will have to be scrapped. The recoverable amount of the cash-generating unit is estimated at £3,000,000. What will be the carrying amount of the land after the impairment loss has been recognised? 800 3,800arrow_forwardThe net assets of Fragrance, a cash generating unit (CGU), are: $ Property, plant and equipment 200,000 Allocated goodwill 50,000 Product patent 20,000 Net current assets (at net realizable value) 30,000 Total 300,000 As a result of adverse publicity, Fragrance has a recoverable amount of only $200,000. What would be the value of Fragrance's property, plant, and equipment after the allocation of the impairment loss? $154,545 $170,000 $160,000 $133,333arrow_forward
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