Sanders Corporation operates a factory in Arizona. Due to a change in business climate, an impairment test is deemed appropriate. Management has acquired the following information for the assets at the plant: Cost $ 243,000,000 Accumulated depreciation 122,000,000 Estimate of the total cash flows to be generated by selling the products manufactured at the Arizona factory, not discounted to present value 110,000,000 Present value of estimated future cash flows 94,000,000 Estimated fair value of the Arizona factory determined by appraisal 90,000,000 Required: 1. Determine the amount of impairment loss, if any. 2. If a loss is indicated, prepare the entry to record the loss. 3. Repeat requirement 1, assuming that Sanders prepares its financial statements according to International Financial Reporting Standards (IFRS). Also assume that the estimated fair value of the factory approximates fair value less costs to sell.
Sanders Corporation operates a factory in Arizona. Due to a change in business climate, an impairment test is deemed appropriate. Management has acquired the following information for the assets at the plant: Cost $ 243,000,000 Accumulated depreciation 122,000,000 Estimate of the total cash flows to be generated by selling the products manufactured at the Arizona factory, not discounted to present value 110,000,000 Present value of estimated future cash flows 94,000,000 Estimated fair value of the Arizona factory determined by appraisal 90,000,000 Required: 1. Determine the amount of impairment loss, if any. 2. If a loss is indicated, prepare the entry to record the loss. 3. Repeat requirement 1, assuming that Sanders prepares its financial statements according to International Financial Reporting Standards (IFRS). Also assume that the estimated fair value of the factory approximates fair value less costs to sell.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Sanders Corporation operates a factory in Arizona. Due to a change in business climate, an impairment test is deemed appropriate. Management has acquired the following information for the assets at the plant:
| Cost | $ | 243,000,000 | |
| 122,000,000 | |||
| Estimate of the total manufactured at the Arizona factory, not discounted to present value |
110,000,000 | ||
| Present value of estimated future cash flows | 94,000,000 | ||
| Estimated fair value of the Arizona factory determined by appraisal | 90,000,000 | ||
Required:
1. Determine the amount of impairment loss, if any.
2. If a loss is indicated, prepare the entry to record the loss.
3. Repeat requirement 1, assuming that Sanders prepares its financial statements according to International Financial Reporting Standards (IFRS). Also assume that the estimated fair value of the factory approximates fair value less costs to sell.
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