Presented below is net asset information related to the Kingbird Division of Santana, Inc.Kingbird DivisionNet AssetsAs of December 31, 2020(in millions)Cash$73Accounts receivable206Property, plant, and equipment (net)2,617Goodwill202Less: Notes payable(2,612 )Net assets$486The purpose of the Kingbird Division is to develop a nuclear-powered aircraft. If successful, traveling delays associated with refuelingcould be substantially reduced. Many other benefits would also occur. To date, management has not had much success and is decidingwhether a write-down at this time is appropriate. Management estimated its future net cash flows from the project to be $445 million.Management has also received an offer to purchase the division for $335 million (deemed an appropriate fair value). All identifiableassets' and liabilities' book and fair value amounts are the same.(a)Your answer is correct. (b)At December 31, 2021, it is estimated that the division's fair value increased to $347 million. Prepare the journal entry to recordthis increase in fair value. (If no entry is required, select "No Entry" for the account titles and enter O for the amounts. Credit account titlesare automatically indented when amount is entered. Do not indent manually.)Account Titles and ExplanationDebitCrediteTextbook and MediaList of Accounts

Solution:- Introduction:- As the sum of estimated future net cash flows is less than Book value of…

(b) At December 31, 2021, it is estimated that the division's fair value increased to $347 million. Prepare the journal entry to record this increase in fair value. (If no entry is required, select "No Entry" for the account titles and enter O for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.) Account Titles and Explanation Debit Credit

(b) At December 31, 2021, it is estimated that the division's fair value increased to $347 million. Prepare the journal entry to record this increase in fair value. (If no entry is required, select "No Entry" for the account titles and enter O for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.) Account Titles and Explanation Debit Credit

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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