**Asset Impairment Analysis**For each of the following scenarios, determine whether an asset has been impaired (Y for yes and N for no), and identify the amount of loss that should be recorded.| **Scenario** | **Book Value** | **Estimated Future Cash Flows** | **Fair Value** | **Is Asset Impaired?** | **Amount of Loss** ||-------------------------|----------------|---------------------------------|----------------|------------------------|--------------------|| a. **Machine** | $15,500 | $10,000 | $9,500 | Y | $6,000 || b. **Copyright** | $31,000 | $41,000 | $37,900 | N | || c. **Factory building** | $58,000 | $29,000 | $27,000 | Y | $31,000 || d. **Building** | $227,000 | $227,000 | $200,000 | N | |- **Machine**: Impairment recognized with a loss of $6,000.- **Copyright**: No impairment recorded.- **Factory building**: Impairment recognized with a loss of $31,000.- **Building**: No impairment recorded.The table illustrates how to evaluate asset impairment based on book value, estimated cash flows, and fair value. The amount of loss is calculated when an asset is deemed impaired. **Transcript for Educational Website**### Business Acquisition Example: Goodwill Calculation**Scenario:**Elizabeth Pie Company has been in operation for 50 years, building a loyal customer base in the restaurant sector. Giant Bakery Inc. has proposed to purchase Elizabeth Pie Company for $5,000,000. The details related to the company’s assets and valuation are as follows:- The book value of Elizabeth Pie's recorded assets and liabilities at the time of the offer is $4,300,000, while the fair value is $4,500,000.- In addition, Elizabeth Pie holds a patent for a pie crust fluting machine they invented. This patent, with a fair value of $300,000, was developed internally and thus was never recorded on the books.- The goodwill from loyal customers is estimated at $310,000, which was also not recorded by the company.**Task:**If Elizabeth Pie Company’s management decides to accept Giant Bakery’s offer of $5,000,000, calculate the amount of goodwill Giant Bakery should record on the purchase date.**Calculation:**To compute goodwill in this acquisition, consider the purchase price and the fair value of identifiable net assets:1. **Fair Value of Identifiable Net Assets:** - Fair value of recorded assets and liabilities: $4,500,000 - Add: Fair value of the patent: $300,000 - Total fair value of identifiable net assets: $4,800,0002. **Goodwill Calculation:** - Purchase Price: $5,000,000 - Less: Fair value of identifiable net assets: $4,800,000 - Goodwill: $200,000Therefore, the goodwill to be recorded by Giant Bakery upon acquisition is $200,000.

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For each of the following scenarios, select whether an asset has been impaired (Y for yes and N for no) and, if so, the amount of loss that should be recorded. a. Machine Copyright b. C. Factory building d. Building $ Book Value 15,500 31,000 58,000 227,000 Answer is not complete. Estimated Future Cash Flows $ 10,000 41,000 29,000 227,000 Fair Value $ 9,500 37,900 27,000 200,000 Is Asset Impaired? Y N Y N ✓ ✓ Amount of Loss

For each of the following scenarios, select whether an asset has been impaired (Y for yes and N for no) and, if so, the amount of loss that should be recorded. a. Machine Copyright b. C. Factory building d. Building $ Book Value 15,500 31,000 58,000 227,000 Answer is not complete. Estimated Future Cash Flows $ 10,000 41,000 29,000 227,000 Fair Value $ 9,500 37,900 27,000 200,000 Is Asset Impaired? Y N Y N ✓ ✓ Amount of Loss

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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