Intermediate Accounting (2nd Edition)
2nd Edition
ISBN: 9780134730370
Author: Elizabeth A. Gordon, Jana S. Raedy, Alexander J. Sannella
Publisher: PEARSON
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Chapter 12, Problem 12.2BE
To determine
To explain: Whether to conduct an impairment test for the current year.
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Alfarabi Company has an asset that had an original cost of $560,000 and depreciation taken to date of $240,000.
Management of Alfarabi Company has decided that the asset has suffered an impairment and its expected future net cash
flows total $80,000. Further, the asset has a remaining useful life of 3 years and a salvage value of $15,000. No active market
exists for the asset and its present value of expected future net cash flows is $61,000.
Instructions:
a. Prepare the journal entry Alfarabi Company would make to record the impairment in the value of the asset.
b. How is the gain or loss on this impairment reported in the income statement?
Intella Manufacturing, Inc. has only one plant asset used in production. The asset had a cost of $535,000 and has been depreciated for 2 full years since the date of acquisition. This accounting resulted in a total accumulated depreciation of $220,000. The firm expects the asset to be productive for an additional 3 years and projects the asset's future cash flows to be $132,000 per year. Information about the company's products indicates that the asset might be impaired. Should the firm record an impairment loss for the current year? (Provide supporting computations.)
First, calculate the carrying value of the asset using the table below.
Less:
Carrying value of asset
Part 2
Next, conduct an impairment test for the asset using the table below.
Step 1:
Asset
Impairment indicated
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
Chapter 12 Solutions
Intermediate Accounting (2nd Edition)
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 - Impairment Reversal. IFRS. Perlu Products an IFRS...Ch. 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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