At the beginning of 2022, Metatec Incorporated acquired Ellison Technology Corporation for $660 million. In addition to cash, receivables, and inventory, the following assets and their fair values were also acquired: Plant and equipment (depreciable assets) Patent Goodwill $ 156 million 46 million 100 million The plant and equipment are depreciated over a 10-year useful life on a straight-line basis. There is no estimated residual value. The patent is estimated to have a five-year useful life, no residual value, and is amortized using the straight-line method. At the end of 2024, a change in business climate indicated to management that the assets of Ellison might be impaired. The following amounts have been determined: Plant and equipment: Undiscounted sum of future cash flows Fair value Patent: Undiscounted sum of future cash flows Fair value Goodwill: Fair value of Ellison Technology Corporation Book value of Ellison's net assets (excluding goodwill) Book value of Ellison's net assets (including goodwill) $ 86 million 66 million $ 21 million 14 million $ 516 million 450 million 530 million* After first recording any impairment losses on plant and equipment and the patent. Required: 1. Compute the book value of the plant and equipment and patent at the end of 2024. 2. When should the plant and equipment and the patent be tested for impairment? 3. When should goodwill be tested for impairment? 4. Determine the amount of any impairment loss to be recorded, if any, for the three assets. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Compute the book value of the plant and equipment and patent at the end of 2024. Note: Enter your answers in millions rounded to 1 decimal place. For example, $5,500,000 should be entered as $5.5. Plant and equipment Patent Book Value million million < Required 1 Required 2 >
At the beginning of 2022, Metatec Incorporated acquired Ellison Technology Corporation for $660 million. In addition to cash, receivables, and inventory, the following assets and their fair values were also acquired: Plant and equipment (depreciable assets) Patent Goodwill $ 156 million 46 million 100 million The plant and equipment are depreciated over a 10-year useful life on a straight-line basis. There is no estimated residual value. The patent is estimated to have a five-year useful life, no residual value, and is amortized using the straight-line method. At the end of 2024, a change in business climate indicated to management that the assets of Ellison might be impaired. The following amounts have been determined: Plant and equipment: Undiscounted sum of future cash flows Fair value Patent: Undiscounted sum of future cash flows Fair value Goodwill: Fair value of Ellison Technology Corporation Book value of Ellison's net assets (excluding goodwill) Book value of Ellison's net assets (including goodwill) $ 86 million 66 million $ 21 million 14 million $ 516 million 450 million 530 million* After first recording any impairment losses on plant and equipment and the patent. Required: 1. Compute the book value of the plant and equipment and patent at the end of 2024. 2. When should the plant and equipment and the patent be tested for impairment? 3. When should goodwill be tested for impairment? 4. Determine the amount of any impairment loss to be recorded, if any, for the three assets. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Compute the book value of the plant and equipment and patent at the end of 2024. Note: Enter your answers in millions rounded to 1 decimal place. For example, $5,500,000 should be entered as $5.5. Plant and equipment Patent Book Value million million < Required 1 Required 2 >
Chapter11: Long-term Assets
Section: Chapter Questions
Problem 11PB: On May 1, 2015, Zoe Inc. purchased Branta Corp. for $15,000,000 in cash. They only received...
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Transcribed Image Text:At the beginning of 2022, Metatec Incorporated acquired Ellison Technology Corporation for $660 million. In addition to cash,
receivables, and inventory, the following assets and their fair values were also acquired:
Plant and equipment (depreciable assets)
Patent
Goodwill
$ 156 million
46 million
100 million
The plant and equipment are depreciated over a 10-year useful life on a straight-line basis. There is no estimated residual value. The
patent is estimated to have a five-year useful life, no residual value, and is amortized using the straight-line method.
At the end of 2024, a change in business climate indicated to management that the assets of Ellison might be impaired. The following
amounts have been determined:
Plant and equipment:
Undiscounted sum of future cash flows
Fair value
Patent:
Undiscounted sum of future cash flows
Fair value
Goodwill:
Fair value of Ellison Technology Corporation
Book value of Ellison's net assets (excluding goodwill)
Book value of Ellison's net assets (including goodwill)
$ 86 million
66 million
$ 21 million
14 million
$ 516 million
450 million
530 million*
After first recording any impairment losses on plant and equipment and the patent.
Required:
1. Compute the book value of the plant and equipment and patent at the end of 2024.
2. When should the plant and equipment and the patent be tested for impairment?
3. When should goodwill be tested for impairment?
4. Determine the amount of any impairment loss to be recorded, if any, for the three assets.
Complete this question by entering your answers in the tabs below.
Required 1
Required 2 Required 3
Required 4
Compute the book value of the plant and equipment and patent at the end of 2024.
Note: Enter your answers in millions rounded to 1 decimal place. For example, $5,500,000 should be entered as $5.5.
Plant and equipment
Patent
Book Value
million
million
< Required 1
Required 2 >
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