Exercise 12-15 Presented below is net asset information related to the Carlos Di

Question

Exercise 12-15 Presented below is net asset information related to the Carlos Division of Santana, Inc. CARLOS DIVISION NET ASSETS AS OF DECEMBER 31, 2014 (IN MILLIONS) Cash $74 Accounts receivable 200 Property, plant, and equipment (net) 2,598 Goodwill 214 Less: Notes payable (2,654 ) Net assets $432 The purpose of the Carlos Division is to develop a nuclear-powered aircraft. If successful, traveling delays associated with refueling could be substantially reduced. Many other benefits would also occur. To date, management has not had much success and is deciding whether a write-down at this time is appropriate. Management estimated its future net cash flows from the project to be $437 million. Management has also received an offer to purchase the division for $344 million. All identifiable assets’ and liabilities’ book and fair value amounts are the same. Prepare the journal entry (if any) to record the impairment at December 31, 2014. (If no entry is required, select "No entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.) Account Titles and Explanation Debit Credit SHOW LIST OF ACCOUNTS At December 31, 2015, it is estimated that the division’s fair value increased to $359 million. Prepare the journal entry (if any) to record this increase in fair value. (If no entry is required, select "No entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.) Account Titles and Explanation Debit Credit SHOW LIST OF ACCOUNTS

Explanation / Answer

Ans 1 Details Amount Amount Book value of Net Assets      432.00 Net Selling Price of the division      344.00 Future Value in Use      437.00 Higher of the above      437.00 Impairement Loss                -   No Entry Ans 2 No Entry                -

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