Wolverine Airlines, a Michigan based low-cost airline flies charter flights to vacation destinations in Nebraska, Iowa, and Cancun, Mexico. During 2020, due to the corona virus pandemic, the airline grounded most of its aircrafts and canceled almost all its booked flights for the summer. Bluebird decided that an impairment test was appropriate. The Chief Accountant has prepared the following information for the assets of the airline ($ in millions) Cost of Aircraft Fleet $800 Estimated undiscounted sum $180 of future cash flows Estimated fair value of aircraft $300 fleet Accumulated depreciation $200 Required: Determine the amount of the impairment loss Bluebird Airlines should recognize, if any. Prepare the journal entry to record the loss, if any. Repeat requirement 1 assuming that the estimated undiscounted sum of future cash flows is $650 million instead of $180.
Wolverine Airlines, a Michigan based low-cost airline flies charter flights to vacation destinations in Nebraska, Iowa, and Cancun, Mexico. During 2020, due to the corona virus pandemic, the airline grounded most of its aircrafts and canceled almost all its booked flights for the summer. Bluebird decided that an impairment test was appropriate. The Chief Accountant has prepared the following information for the assets of the airline ($ in millions) Cost of Aircraft Fleet $800 Estimated undiscounted sum $180 of future cash flows Estimated fair value of aircraft $300 fleet Accumulated depreciation $200 Required: Determine the amount of the impairment loss Bluebird Airlines should recognize, if any. Prepare the journal entry to record the loss, if any. Repeat requirement 1 assuming that the estimated undiscounted sum of future cash flows is $650 million instead of $180.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Wolverine Airlines, a Michigan based low-cost airline flies charter flights to vacation destinations in Nebraska, Iowa, and Cancun, Mexico. During 2020, due to the corona virus pandemic, the airline grounded most of its aircrafts and canceled almost all its booked flights for the summer. Bluebird decided that an impairment test was appropriate. The Chief Accountant has prepared the following information for the assets of the airline ($ in millions)
Cost of Aircraft Fleet $800
Estimated undiscounted sum $180
of future
Estimated fair value of aircraft $300
fleet
Required:
- Determine the amount of the impairment loss Bluebird Airlines should recognize, if any.
- Prepare the
journal entry to record the loss, if any. - Repeat requirement 1 assuming that the estimated undiscounted sum of future cash flows is $650 million instead of $180.
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