General Optic Corporation operates a manufacturing plant in Arizona. Due to a significant decline in demand forthe product manufactured at the Arizona site, an impairment test is deemed appropriate. Management has acquiredthe following information for the assets at the plant:Cost $ 32,500,000Accumulated depreciation 14,200,000General’s estimate of the total cash flows to be generated by selling theproducts manufactured at its Arizona plant, not discounted to present value15,000,000The fair value of the Arizona plant is estimated to be $11,000,000.Required:1. Determine the amount of impairment loss, if any.2. If a loss is indicated, where would it appear in General Optic’s multiple-step income statement?3. If a loss is indicated, prepare the entry to record the loss.4. Repeat requirement 1 assuming that the estimated undiscounted sum of future cash flows is $12,000,000instead of $15,000,000.5. Repeat requirement 1 assuming that the estimated undiscounted sum of future cash flows is $19,000,000instead of $15,000,000
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 $ 32,500,000
General’s estimate of the total
products manufactured at its Arizona plant, not discounted to present value
15,000,000
The fair value of the Arizona plant is estimated to be $11,000,000.
Required:
1. Determine the amount of impairment loss, if any.
2. If a loss is indicated, where would it appear in General Optic’s multiple-step income statement?
3. If a loss is indicated, prepare the entry to record the loss.
4. Repeat requirement 1 assuming that the estimated undiscounted sum of future cash flows is $12,000,000
instead of $15,000,000.
5. Repeat requirement 1 assuming that the estimated undiscounted sum of future cash flows is $19,000,000
instead of $15,000,000
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