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Determine the amount of any impairment loss to be recorded, if any, for the three assets.

Determine the amount of any impairment loss to be recorded, if any, for the three assets.

FINANCIAL ACCOUNTING
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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At the beginning of 2019, Metatec Inc. acquired Ellison Technology Corporation for $530 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 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 5-year useful life, no residual value, and is amortized using the straight-line method. $143 million 33 million 120 million At the end of 2021, 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 $73 million 53 million $ 19 million 12 million Goodwill: Fair value of Ellison Technology Corporation Fair value of Ellison's net assets (excluding goodwill) Book value of Ellison's net assets (including goodwill) After first recording any impairment losses on plant and equipment and the patent. $373 million 320 million 400 million*
Transcribed Image Text:At the beginning of 2019, Metatec Inc. acquired Ellison Technology Corporation for $530 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 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 5-year useful life, no residual value, and is amortized using the straight-line method. $143 million 33 million 120 million At the end of 2021, 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 $73 million 53 million $ 19 million 12 million Goodwill: Fair value of Ellison Technology Corporation Fair value of Ellison's net assets (excluding goodwill) Book value of Ellison's net assets (including goodwill) After first recording any impairment losses on plant and equipment and the patent. $373 million 320 million 400 million*
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 4 Determine the amount of any impairment loss to be recorded, if any, for the three assets. (Enter your answers in millions. Round your final answers to nearest whole dollar.) Plant and equipment Patent Goodwill Impairment Loss $ 47 million $0 million million
Transcribed Image Text: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 4 Determine the amount of any impairment loss to be recorded, if any, for the three assets. (Enter your answers in millions. Round your final answers to nearest whole dollar.) Plant and equipment Patent Goodwill Impairment Loss $ 47 million $0 million million
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