12 General Optic Corporation operates a manufacturing plant in Arizona. Due to a

Question

12 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: 10 points Cost Accumulated depreciation General 's estimate of the total cash flows to be generated by selling the products $43,500,000 15,300,000 17,208,000 manufactured at its Arizona plant, not discounted to present value eBook The fair value of the Arizona plant is estimated to be $16,500,000. Hint Required 1. &2. Determine the amount of impairment loss. If a loss is indicated, where would it appear in General Optic's multiple-step income 3. If a loss is indicated, prepare the entry to record the loss instead of $17,200,000 and $29150,000 instead of $17,200,000. statement? Print 4.&5. Determine the amount of impairment loss assuming that the estimated undiscounted sum of future cash flows is $16,500,000 Complete this question by entering your answers in the tabs below Req 1 and 2 Req 3 Req 4 and 5 Determine the amount of impairment loss. If a loss is indicated, where would it appear in General Optic's multiple-step income statement? (Enter your answer in whole dollars.) Impairment loss Location on income statement Req 1 and 2 Req 3>

Explanation / Answer

Ans-1 &2

(a) Written down value=cost-accumulated depreciation

IE. = $43500000-$15300000= $28500000

(b) estimated cashflow from sale of product =$ 17200000

(c) fair value =$16500000

Recoverable amount b or c whichever is higher

IE. (B) $17200000

Impairment loss= WDV-recoveable amount= $28500000-$17200000=$11300000.

Yes.. It should be shown in multiple step income statement.

Ans3- entree

1-Profit loss. ...Dr. $11300000

To Impirement loss. $11300000

(Being assets impaired )

2- Impairment loss. Dr. $11300000

To assets. $11300000

(being value of assets revised)

Ans-4 &5

Impairment loss= $28500000-$16500000=$1200000

Impairment loss=$28500000-$2915000= nil (not impaired)

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