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Blue Company owns a trade name that was purchased in an acquisition of McClellan Company. The trade name has a book value of $ 3,500,000, but according to GAAP, it is assessed for impairment on an annual basis. To perform this impairment test, Blue must estimate the fair value of the trade name. It has developed the following cash flow estimates related to the trade name based on internal information. Each cash flow estimate reflects Blue's estimate of annual cash flows over the next 11 years. The trade name is assumed to have no salvage value after the 11 years. (Assume the cash flows occur at the end of each year) Cash Flow Estimate Probability Assessment $378,900 20% 649,400 50% 758.000 30% Click here to view factor tables (a) What is the estimated fair value of the trade name? Blue determines that the appropriate discount rate for this estimation is 11% (Round factor values to 5 decimal places, eg 1.25124 and final answer to 0 decimal places, eg 458,581.) Estimated fair value

Blue Company owns a trade name that was purchased in an acquisition of McClellan Company. The trade name has a book value of $ 3,500,000, but according to GAAP, it is assessed for impairment on an annual basis. To perform this impairment test, Blue must estimate the fair value of the trade name. It has developed the following cash flow estimates related to the trade name based on internal information. Each cash flow estimate reflects Blue's estimate of annual cash flows over the next 11 years. The trade name is assumed to have no salvage value after the 11 years. (Assume the cash flows occur at the end of each year) Cash Flow Estimate Probability Assessment $378,900 20% 649,400 50% 758.000 30% Click here to view factor tables (a) What is the estimated fair value of the trade name? Blue determines that the appropriate discount rate for this estimation is 11% (Round factor values to 5 decimal places, eg 1.25124 and final answer to 0 decimal places, eg 458,581.) Estimated fair value

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Blue Company owns a trade name that was purchased in an acquisition of McClellan Company. The trade name has a book value of $ 3,500,000, but according to GAAP, it is assessed for impairment on an annual basis. To perform this impairment test, Blue must estimate the fair value of the trade name. It has developed the following cash flow estimates related to the trade name based on internal information. Each cash flow estimate reflects Blue's estimate of annual cash flows over the next 11 years. The trade name is assumed to have no salvage value after the 11 years. (Assume the cash flows occur at the end of each year) Cash Flow Estimate Probability Assessment $378,900 20% 649,400 50% 758.000 30% Click here to view factor tables (a) What is the estimated fair value of the trade name? Blue determines that the appropriate discount rate for this estimation is 11% (Round factor values to 5 decimal places, eg 1.25124 and final answer to 0 decimal places, eg 458,581.) Estimated fair value
Transcribed Image Text:Blue Company owns a trade name that was purchased in an acquisition of McClellan Company. The trade name has a book value of $ 3,500,000, but according to GAAP, it is assessed for impairment on an annual basis. To perform this impairment test, Blue must estimate the fair value of the trade name. It has developed the following cash flow estimates related to the trade name based on internal information. Each cash flow estimate reflects Blue's estimate of annual cash flows over the next 11 years. The trade name is assumed to have no salvage value after the 11 years. (Assume the cash flows occur at the end of each year) Cash Flow Estimate Probability Assessment $378,900 20% 649,400 50% 758.000 30% Click here to view factor tables (a) What is the estimated fair value of the trade name? Blue determines that the appropriate discount rate for this estimation is 11% (Round factor values to 5 decimal places, eg 1.25124 and final answer to 0 decimal places, eg 458,581.) Estimated fair value
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