General Optic Corporation operates a manufacturing plant in Arizona. Due to a si
ID: 2482948 • Letter: G
Question
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:
General’s estimate of the total cash flows to be generated by selling the products manufactured at its Arizona plant, not discounted to present value
Determine the amount of impairment loss. (Enter your answer in whole dollars.)
If a loss is indicated, where would it appear in General Optic’s multiple-step income statement?
Operating expenses
If a loss is indicated, prepare the entry to record the loss. (If no entry is required for an event, select "No journal entry required" in the first account field. Enter your answers in whole dollars.)
Journal Entry Worksheet
Record the entry of impairment loss.
Determine the amount of impairment loss assuming that the estimated undiscounted sum of future cash flows is $16,000,000 instead of $16,600,000. (Enter your answer in whole dollars.)
Determine the amount of impairment loss assuming that the estimated undiscounted sum of future cash flows is $26,250,000 instead of $16,600,000.(Enter your answer in whole dollars.)
Cost $ 40,500,000 Accumulated depreciation 15,000,000General’s estimate of the total cash flows to be generated by selling the products manufactured at its Arizona plant, not discounted to present value
16,600,000Explanation / Answer
Determine the amount of impairment loss
Book Value =Cost- Accumulated depreciation = $40,500,000-$15,000,000 = $25,500,000
An imporitement loss is indicated because the estimated undsicounted sume of future cash flows of $16.60 million is less than the book value of 25.50milliom
If a loss is indicated, where would it appear in General Optic’s multiple-step income statement?
Answer
The amount of loss to be reported:-
Book Value$ 25,500,000
Estimated fair value 15,000,000
Impairement Loss 10,500,000
The loss would appear in the income statement as an other operating expense
If a loss is indicated, prepare the entry to record the loss
Dr Impairement Loss 10,500,000
Dr Accumulated Depreciation 15,000,000
Cr Assets 25,500,000
Determine the amount of impairment loss assuming that the estimated undiscounted sum of future cash flows is $16,000,000 instead of $16,600,000
There is an impairment loss because the undsicounted sum of future cas flows (16million)is less then the book values of 25.50 million
The amount of impairement loss:
Book Value 25,500,000
Fair Value 15,000,000
Impairement Loss 10,500,000
Determine the amount of impairment loss assuming that the estimated undiscounted sum of future cash flows is $26,250,000 instead of $16,600,000
There is not impairement loss because the undiscounted future cash flows (26.25 million)is greated then the book value of 25.50 million
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