Chadwick Enterprises, Inc., operates several restaurants throughout the Midwest. Three of its restaurants located in the center of a large urban area have experienced declining profits due to declining population. The company’s management has decided to test the assets of the restaurants for possible impairment. The relevant information for these assets is presented below. Book value $6.5 millionEstimated undiscounted sum of future cash flows 4.0 millionFair value 3.5 million Required:1. Determine the amount of the impairment loss, if any.2. Repeat requirement 1 assuming that the estimated undiscounted sum of future cash flows is $6.8 million and fair value is $5 million.
Chadwick Enterprises, Inc., operates several restaurants throughout the Midwest. Three of its restaurants located in the center of a large urban area have experienced declining profits due to declining population. The company’s management has decided to test the assets of the restaurants for possible impairment. The relevant information for these assets is presented below.
Book value $6.5 million
Estimated undiscounted sum of future
Fair value 3.5 million
Required:
1. Determine the amount of the impairment loss, if any.
2. Repeat requirement 1 assuming that the estimated undiscounted sum of future cash flows is $6.8 million and fair value is $5 million.
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