Net Assets as of December 31,2010 for Mischa Division Cash 60 Receivables 200 Pr

Question

Net Assets as of December 31,2010 for Mischa Division
Cash 60
Receivables 200
Property. plant, and equipment
Goodwill 200
Less: Notes Payable (2700)
Net assets 360

The purpose ofthe Mischa Division is to develop a nuclear-powered aircraft. If sucessful, traveling delays associated with refueling could be substanially reduced. Mant other benefits would also occur. To date, management has not had much sucess and is deciding whether a write-down at this time is appropiate. Mangement estimated its future cash flows from the project to 400 million. Management has also received an offer to purchase the division for 355 million. Allidentifiable assets and liabilities book and fair value ampounts are the same.
Prepare the journal entry (if any) to record the impairment for at Decmeber 31,2010.

Explanation / Answer

Credit to goodwill (an asset) and a debit to stockholders equity, both for 45 million.

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