General Optic Corporation operates a manufacturing plant in Arizona. Due to a significant decline in demand for the product manufactured at the Arizona site, an impairment test is deemed appropriate. Management has acquired the following information for the assets at the plant: Cost $ 35.5million Accumulated depreciation $ 14.5million General’s estimate of the total cash flows to be generated by selling the products manufactured at its Arizona plant, not discounted to present value $ 15.6million The fair value of the Arizona plant is estimated to be $12.5 million. Required: 1. Determine the amount of impairment loss. 2. If a loss is indicated, prepare the entry to record the loss. 3. & 4. Determine the amount of impairment loss assuming that the estimated undiscounted sum of future cash flows is (3) $13.5 million instead of $15.6 million and (4) $21.25 million instead of $15.6 million.
General Optic Corporation operates a manufacturing plant in Arizona. Due to a significant decline in demand for the product manufactured at the Arizona site, an impairment test is deemed appropriate. Management has acquired the following information for the assets at the plant:
Cost $ 35.5million
General’s estimate of the total
manufactured at its Arizona plant, not discounted to present value $ 15.6million
The fair value of the Arizona plant is estimated to be $12.5 million.
Required:
1. Determine the amount of impairment loss.
2. If a loss is indicated, prepare the entry to record the loss.
3. & 4. Determine the amount of impairment loss assuming that the estimated undiscounted sum of future cash flows is (3) $13.5 million instead of $15.6 million and (4) $21.25 million instead of $15.6 million.
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