**Skysong Company: Fair Value Estimation of a Trade Name**Skysong Company acquired a trade name through its acquisition of McClellan Company. The trade name holds a book value of $3,500,000. According to GAAP, it requires annual impairment assessment. For this purpose, Skysong must determine the fair value of the trade name using internal data. Cash flow estimates projected for the trade name are assessed for the next 11 years, with no anticipated salvage value at the end.**Cash Flow Estimates and Probabilities:**The table below provides Skysong’s cash flow estimates, reflecting annual cash flow expectations, paired with probability assessments for each scenario:| Cash Flow Estimate | Probability Assessment ||--------------------|------------------------|| $378,900 | 20% || $646,700 | 50% || $754,000 | 30% |(*Assume cash flows occur at the end of each year*)**Calculation of Fair Value:**To proceed with the estimation of fair value, Skysong has determined a discount rate of 11% should be applied. The calculation involves using the provided probability assessments to compute the expected cash flow and then discounting it to present value.**Interactive Learning:**For additional calculations, click to view factor tables. Students will round factor values to five decimal places, e.g., 1.25124, and the final answer to zero decimal places, e.g., 458,581.**Question:**(a) What is the estimated fair value of the trade name?- Enter the estimated fair value based on your calculations.

PRESENT VALUE Present Value is the Current Value of a Future amount of money or a series of Cash…

Skysong Company owns a trade name that was purchased in an acquisition of McClellan Company. The trade name has a book value of $3,500,000, but according to GAAP, it is assessed for impairment on an annual basis. To perform this impairment test, Skysong must estimate the fair value of the trade name. It has developed the following cash flow estimates related to the trade name based on internal information. Each cash flow estimate reflects Skysong's estimate of annual cash flows over the next 11 years. The trade name is assumed to have no salvage value after the 11 years. (Assume the cash flows occur at the end of each year.) Cash Flow Estimate $378,900 646,700 754,000 Probability Assessment Click here to view factor tables 20% Estimated fair value $ 50% 30% (a) What is the estimated fair value of the trade name? Skysong determines that the appropriate discount rate for this estimation is 11%. (Round factor values to 5 decimal places, e.g. 1.25124 and final answer to 0 decimal places, e.g. 458,581.)

Skysong Company owns a trade name that was purchased in an acquisition of McClellan Company. The trade name has a book value of $3,500,000, but according to GAAP, it is assessed for impairment on an annual basis. To perform this impairment test, Skysong must estimate the fair value of the trade name. It has developed the following cash flow estimates related to the trade name based on internal information. Each cash flow estimate reflects Skysong's estimate of annual cash flows over the next 11 years. The trade name is assumed to have no salvage value after the 11 years. (Assume the cash flows occur at the end of each year.) Cash Flow Estimate $378,900 646,700 754,000 Probability Assessment Click here to view factor tables 20% Estimated fair value $ 50% 30% (a) What is the estimated fair value of the trade name? Skysong determines that the appropriate discount rate for this estimation is 11%. (Round factor values to 5 decimal places, e.g. 1.25124 and final answer to 0 decimal places, e.g. 458,581.)

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

BBB Company had the following assets at December 31, 2022: Cash (of which P25,000 is earmarked for the acquisition of equipment) - P490,000 Trading Securities (including P200,000 investment in FVTOCI) - P380, 000 Accounts Receivable, net (including P500,000 due from an officer on December 31, 2024) - P1, 250,000 Non-Trade Notes Receivable (due in equal semi-annual installments of P50, 000 every March 1 and September 1) - P300,000 Merchandise Inventory - P900, 000 Prepaid Expenses - P80,000 Plant and Equipment, net - P3,750,000 How much is the Total Current Assets at December 31, 2022? How much is the Total Non - Current Assets at December 31, 2022?
Zebra SA is carrying out its annual impairment review. The carrying amounts of its cash generating unit are as follows:Goodwill 90000Office Headquarters 450000patents and software 120000 equipment 89000 total CA = 749000 There are indications that the CGU may be impaired. The net selling price of the CGU is estimated at €550,000. Value in Use has been calculated at €593,100.Further Information:Lion BV has recently sought to purchase Zebra’s patents and software. They were willing to pay €110,000. An office similar to the headquarters recently sold for €420,000.1. calculate the amount of the impairment loss and show how this should be allocated between the assets of the CGU (firstly without the further information about the Lion BV purchases and then finally incorporating that further information). Explain your workings
Please help me
Culver Company owns specialized equipment that was purchased in an acquisition of Riding Company. The equipment has a book value of $1,560,000, but according to IFRS it is assessed for impairment on an annual basis. To perform this impairment test, Culver must estimate the fair value of the equipment. It has developed the following cash flow estimates related to the equipment based on internal information. Each cash flow estimate reflects Culver's estimate of annual cash flows over the next 7 years. The equipment is assumed to have no residual value after the 7 years. (Assume the cash flows occur at the end of each year.) Year Cash Flow Estimate 1-3 4-6 7 $208,000 316,000 368,000 Culver determines, using its own assumptions, that the appropriate discount rate for this estimation is 6%. What is the estimated fair value of the equipment? (Round answer to 0 decimal places, eg. 5,275. For calculation purposes, use 5 decimal places as displayed in the factor table provided.) Click here to…
Johnstone Company is facing several decisions regarding investing and financing activities. Address each decision independently. (FV of $1, PV of $1, FVA of $1, FVAD of $1 and PVAD of$1) (Use appropriate factor(s) from the tables provided.) 1.On June 30, 2021, the Johnstone Company purchased equipment form Genovese Corp. Johnstone agreed to pay Genovese $20,000 on the purchase date and the balance in five annual installments of $8,000 on each June 30 beginning June 30, 2022. Assuming that an interest rate of 10% properly reflects the time value of money in this situation, at what amount should Johnstone value the equipment? 2.Johnstone needs to accumulate sufficient funds to pay a $5000,000 debt that comes due on December 31, 2026. The company will accumulate the funds by making five equal annual deposits to an account paying 9% interest compounded annually. Determine the required annual deposit if the first deposit is made on December 31, 2021. 3.On January 1, 2021, Johnstone leased…
A company exchanged old equipment and $18,200 cash for similar equipment. The book value and the fair value of the old equipment were $81,000 and $91,800, respectively. Assuming that the exchange has commercial substance, the company would record a gain(loss) of:
Llungby AB spent 1,000,000 krone in 2017 on the development of a new product. The company determined that 25 percent of this amount was incurred after the criteria in IAS 36 for capitalization as an intangible asset had been met. The newly developed product is brought to market in January 2018 and is expected to generate sales revenue for five years. Assume that a foreign company using IFRS is owned by a company using U.S. GAAP. Thus, IFRS balances must be converted to U.S. GAAP to prepare consolidated financial statements. Ignore income taxes. Required: Prepare journal entries for development costs for the years ending December 31, 2017, and December 31, 2018, under (1) IFRS and (2) U.S. GAAP. Prepare the entry(ies) that the U.S. parent would make on the December 31, 2017, and December 31, 2018, conversion worksheets to convert IFRS balances to U.S. GAAP.
Johnstone Company is facing several decisions regarding investing and financing activities. Address each decision independently. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.)1. On June 30, 2021, the Johnstone Company purchased equipment from Genovese Corp. Johnstone agreed to pay Genovese $26,000 on the purchase date and the balance in five annual installments of $9,000 on each June 30 beginning June 30, 2022. Assuming that an interest rate of 11% properly reflects the time value of money in this situation, at what amount should Johnstone value the equipment?
Calaveras Tire exchanged equipment for two pickup trucks. The book value and fair value of the equipment given up were $23,000 (original cost of $69,500 less accumulated depreciation of $46,500) and $18,500, respectively. Assume Calaveras paid $9,500 in cash and the exchange has commercial substance. (1) At what amount will Calaveras value the pickup trucks? (2) How much gain or loss will the company recognize on the exchange?
The management of Bonita Inc. was discussing whether certain equipment should be written off as a charge to current operations because of obsolescence. This equipment has a cost of $981,000 with depreciation to date of $436,000 as of December 31, 2025. On December 31, 2025, management projected its future net cash flows from this equipment to be $327,000 and its fair value to be $250,700. The company intends to use this equipment in the future. (a) Prepare the journal entry (if any) to record the impairment at December 31, 2025. (If no entry is required, select "No entry" for the account titles and enter O for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually. List debit entry before credit entry.) Date Dec. 31 Account Titles and Explanation eTextbook and Media List of Accounts Debit Credit
On January 1, 2021, Bambi Ltd. purchased equipment for $728,000. The equipment was assumed to have an 8-year useful life and no residual value and was to be depreciated using the straight-line method. On January 1, 2023, Bambi's management became concernedthat the equipment may have become obsolete. Management calculated that the undiscounted future net cash flows from the equipment was $523,250, the discounted future net cash flows was $464,100, and the current fair value of the equipment less cost ofdisposal (of $1,800 ) was $455,000. c) Assuming that Bambi is a public Canadian company, identify which model should be used to test for impairment. d) Record the journal entry to record the impairment loss, if any. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. List debit entry before credit entry.) Account Titles and Explanation Debit…