Carla 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, Carla 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 Carla's estimate of annual cash flows over the next 9 years. The trade name is assumed to have no salvage value after the 9 years. (Assume the cash flows occur at the end of each year.) Cash Flow Estimate $381,100 649,200 759,600 Probability Assessment 20% 50% 30% Click here to view factor tables (a) What is the estimated fair value of the trade name? Carla determines that the appropriate discount rate for this estimation is 9%. (Round factor values to 5 decimal places, e.g. 1.25124 and final answer to 0 decimal places, e.g. 458,581.)

Carla 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, Carla 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 Carla's estimate of annual cash flows over the next 9 years. The trade name is assumed to have no salvage value after the 9 years. (Assume the cash flows occur at the end of each year.) Cash Flow Estimate $381,100 649,200 759,600 Probability Assessment 20% 50% 30% Click here to view factor tables (a) What is the estimated fair value of the trade name? Carla determines that the appropriate discount rate for this estimation is 9%. (Round factor values to 5 decimal places, e.g. 1.25124 and final answer to 0 decimal places, e.g. 458,581.)

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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Current Attempt in Progress Sarasota 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, Sarasota 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 Sarasota's estimate of annual cash flows over the next 9 years. The trade name is assumed to have no salvage value after the 9 years. (Assume the cash flows occur at the end of each year) Probability Assessment Cash Flow Estimate $380,600 646,900 768,300 Click here to view factor tables. 20% Estimated fair value $ 50% 30% (a) What is the estimated fair value of the trade name? Sarasota determines that the appropriate discount rate for this estimation is 9%. (Round factor values to 5 decimal places, e.g. 1.25124 and final…
Culver Company owns specialized equipment that was purchased in an acquisition of Riding Company. The equipment has a book value of $1,560,000, but according to IFRS it is assessed for impairment on an annual basis. To perform this impairment test, Culver must estimate the fair value of the equipment. It has developed the following cash flow estimates related to the equipment based on internal information. Each cash flow estimate reflects Culver's estimate of annual cash flows over the next 7 years. The equipment is assumed to have no residual value after the 7 years. (Assume the cash flows occur at the end of each year.) Year Cash Flow Estimate 1-3 4-6 7 $208,000 316,000 368,000 Culver determines, using its own assumptions, that the appropriate discount rate for this estimation is 6%. What is the estimated fair value of the equipment? (Round answer to 0 decimal places, eg. 5,275. For calculation purposes, use 5 decimal places as displayed in the factor table provided.) Click here to…
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