Fitzgerald Inc. uses IFRS and accounts for their property plant & equipment at amortized cost. Fitzgerald has a cash generating unit, Small Division, with a very unique business. Small Division has the following carrying amounts at June 30, 2021, its year end: Land Building Equipment $ 2,000 30,000 5,800 At June 30, 2021, the undiscounted future cash flows from operation and disposal of the division are estimated to be $38,000 (present value $33,500). The land could now be sold for $3,000 (net of costs) but no separate valuations can be done on the building and equipment as there is little market for them for standalone use. Required: a. Perform impairment testing for the Small Division and calculate any impairment loss. b. Prepare the journal entry resulting from (a) c. Would your answer change if Fitzgerald reported under ÁSPE? How & Why?
Fitzgerald Inc. uses IFRS and accounts for their property plant & equipment at amortized cost. Fitzgerald has a cash generating unit, Small Division, with a very unique business. Small Division has the following carrying amounts at June 30, 2021, its year end: Land Building Equipment $ 2,000 30,000 5,800 At June 30, 2021, the undiscounted future cash flows from operation and disposal of the division are estimated to be $38,000 (present value $33,500). The land could now be sold for $3,000 (net of costs) but no separate valuations can be done on the building and equipment as there is little market for them for standalone use. Required: a. Perform impairment testing for the Small Division and calculate any impairment loss. b. Prepare the journal entry resulting from (a) c. Would your answer change if Fitzgerald reported under ÁSPE? How & Why?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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Transcribed Image Text:Fitzgerald Inc. uses IFRS and accounts for their
property plant & equipment at amortized cost.
Fitzgerald has a cash generating unit, Small
Division, with a very unique business. Small
Division has the following carrying amounts at
June 30, 2021, its year end:
$ 2,000
30,000
5,800
Land
Building
Equipment
At June 30, 2021, the undiscounted future cash
flows from operation and disposal of the division
are estimated to be $38,000 (present value
$33,500). The land could now be sold for $3,000
(net of costs) but no separate valuations can be
done on the building and equipment as there is
little market for them for standalone use.
Required:
a. Perform impairment testing for the Small Division
and calculate any impairment loss.
b. Prepare the journal entry resulting from (a)
c. Would your answer change if Fitzgerald reported
under ASPE? How & Why?
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