Problem 3: Impairment The Rolling Cones operates a fleet of ice cream trucks and three ice cream cafes. In late 2024, a significant adverse change in the business climate indicated to management that the assets of the café division may be impaired. The following information was identified: . . . Cost of division assets: $32.5 Million Book value of division assets: $18.3 Million Fair value of division assets: $11 Million Sum of estimated future cash flows generated from division assets: $15 Million What amount of impairment loss should The Rolling Cones report in its income statement? And what journal entry should be posted? Recoverability test: Measurement: Journal Entry

Problem 3: Impairment The Rolling Cones operates a fleet of ice cream trucks and three ice cream cafes. In late 2024, a significant adverse change in the business climate indicated to management that the assets of the café division may be impaired. The following information was identified: . . . Cost of division assets: $32.5 Million Book value of division assets: $18.3 Million Fair value of division assets: $11 Million Sum of estimated future cash flows generated from division assets: $15 Million What amount of impairment loss should The Rolling Cones report in its income statement? And what journal entry should be posted? Recoverability test: Measurement: Journal Entry

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

Chapter7: Operating Assets

Section: Chapter Questions

Problem 61E

See similar textbooks

Similar questions

Required information [The following information applies to the questions displayed below.] Midwest Services, Inc., operates several restaurant chains throughout the Midwest. One restaurant chain has experienced sharply declining profits. The company's management has decided to test the operational assets of the restaurants for possible impairment. The relevant information for these assets is presented below. Book value $8.5 million 7.0 million 5.8 million Estimated total future cash flows Fair value 2. Determine the amount of the impairment loss, if any, assuming that the estimated total future cash flows are $9.9 million and the fair value is $8.1 million. (Enter your answer in millions rounded to 1 decimal place (i.e., 5,500,000 should be entered as 5.5).) Impairment loss million
Impairment of a CGU (Cash Generating Unit) Potters Ltd has determined that its fine china division is a CGU. The carrying amounts of the assets at 30 June 2016 are as follows: Factory $210 000 Land 150 000 Equipment 120 000 Inventories 60 000 Potters Ltd calculated the value in use of the division to be $510 000. Required: Provide the necessary journal entries for the impairment loss.
Required information [The following information applies to the questions displayed below.] Midwest Services, Inc., operates several restaurant chains throughout the Midwest. One restaurant chain has experienced sharply declining profits. The company's management has decided to test the operational assets of the restaurants for possible impairment. The relevant information for these assets is presented below. Book value Estimated total future cash flows Fair value $8.5 million 7.0 million 5.8 million Required: 1. Determine the amount of the impairment loss, if any. (Enter your answer in millions rounded to 1 decimal place (i.e., 5,500,000 should be entered as 5.5).) Impairment loss million
a. A company runs a unit suffers a massive drop income due to the failure of its technology on 1 January 2018. The following carrying values were recorded in the books immediately prior to the impairment. Shs m Goodwill 20 Technology 5 Brand 10 Land 50 Buildings 30 Other net assets 40 Total 155 The recoverable value of the unit is estimated at shs 85 million. The technology is worthless, following its complete failure. The other net assets include inventory, receivables and payables. It is considered that the book value of other net assets is a reasonable representation of its net realizable value. Required Calculate the impairment on 1 January 2018.
Case: Impairment Atlantic Shipping and Transportation Ltd divides its operations into four kinds, and its headquarters in Hong Kong is not allocated to the four kinds of operations with a carrying amount of $2 billion.Atlantic Shipping is reviewing the impairment of each operation due to the keen competition in the shipping and transportation industries. It considers that each operation is a cash generating unit. The carrying amount of each operation and its estimated value in use are set out as follows (in $million): Shipping Operation Terminal Operation Bus Operation Other Operation Carrying amount of the unit 1,000 2,500 2,000 800 Estimated remaining useful life 10 years 20 years 10 years 15 years Value in use 2,500 2,000 2,000 500 The back-office operation and related assets are carried at $ 1 billion. However, Atlantic Shipping considers that only headquarters can be allocated on a reasonable and consistent basis and no allocation of the back-office operations and…
Required information [The following information applies to the questions displayed below) El Dorado Foods Inc. owns a chain of specialty stores in the Pacific Northwest. Recently, four of the stores have experienced declining profits due to market saturation in the area. As a result, management gathered data about possible impairment of the assets of the stores. The information gathered was as follows Book value: $1775 million Fair value (Present value of future cash flows): $14.95 milion Undiscounted sum of future cash flows: $16.75 million Required: Determine the amount, if any, of the impairment loss that El Dorado must recognize on these assets. (Enter your answer in millions rounded to 2 decimal places (I.e., 5,500,000 should be entered es 5.50).) Impairment loss million
Impairment of a CGU (Cash Generating Unit) Potters Ltd has determined that its fine china division is a CGU. The carrying amounts of the assets at 30 June 2016 are as follows: Factory $210 000 Land 150 000 Equipment 120 000 Inventories 60 000 Potters Ltd calculated the value in use of the division to be $510 000. Required: Provide the necessary journal entries for the impairment loss. Answer: POTTERS LTD If recoverable amount is xxx, then there is an impairment loss of xxx. Assuming the inventory is carried at the lower of costs and net realisable value, the allocation of the impairment loss is as follows: Carrying Proportion Allocation Net Carrying Amount of Loss Amount…
Case: Impairment Atlantic Shipping and Transportation Ltd divides its operations into four kinds, and its headquarters in Hong Kong is not allocated to the four kinds of operations with a carrying amount of $2 billion. Atlantic Shipping is reviewing the impairment of each operation due to the keen competition in the shipping and transportation industries. It considers that each operation is a cash generating unit. The carrying amount of each operation and its estimated value in use are set out as follows (in $million): Other Shipping Operation Terminal Bus Operation Operation Operation Carrying amount of the 1,000 2,500 2,000 800 unit Estimated remaining 10 years 20 years 10 years 15 years useful Life Value in Use 2,500 2,000 2,000 500 The back-office operation and related assets are carried at $ 1 billion. However, Atlantic Shipping considers that only headquarters can be allocated on a reasonable and consistent basis and no allocation of the back-office operations and related assets…
Impairment of a CGU (Cash Generating Unit) Potters Ltd has determined that its fine China division is a CGU. The carrying amounts of the assets at 30 June 2021 are as follows: Factory $220,000 Land 150,000 Equipment 120,000 Inventories 60,000 Potters Ltd calculated the value in use of the division to be $510 000. POTTERS LTD If recoverable amount is $510 000, then there is an impairment loss of $40 000 (i.e., $550,000 – 510,000) Required: Provide the necessary journal entries for the impairment loss.
Staton Corporation's balance sheet includes Equipment recorded at a cost of $110,000 and accumulated depreciation of 20,000. After performing its annual review for impairment, Staton determined the following: Asset value in use $69,000 Fair value less selling costs 67,000 Undiscounted cash flows... 89,000 a Assuming Staton uses the rational entity impairment model record the appropriate entries. b Assuming Staton uses the cost recovery model calculate the impairment if any.
Required information [The following information applies to the questions displayed below.] Midwest Services, Incorporated, operates several restaurant chains throughout the Midwest. One restaurant chain has experienced sharply declining profits. The company's management has decided to test the property and equipment of the restaurants for possible impairment. The relevant information for these assets is presented below. Book value Estimated total future cash flows Fair value Assessment Tool iFrame Determine the financial statement effects of the impairment loss, if any. Note: Amounts to be deducted should be indicated by a minus sign. Enter your answer in millions rounded to 1 decimal place (i.e., 5,500,000 should be entered as 5.5). Assets Balance Sheet $8.6 million 7.1 million 5.9 million Liabilities Stockholders' Equity Retained Earnings Common Stock Revenues Income Statement Expenses Net Incon
Jersey plc has a division with the following balances in its Statement of financial position. The division is considered to be a cash generating unit. Carrying amount £’000 Goodwill 640 Plant 1,000 Building 2,260 Intangible assets 800 4,700 A decline in business due to COVID has caused Jersey to conduct an impairment review. The recoverable amount is found to be £3.7million. A recent valuation of the building found it had a market value of £2.5m. To the nearest thousand, what is the balance on the Intangible assets following the impairment review? a. £640k b. £630k c. £800k d. £729k