Calculate impairment loss Atlantis Seafoods Co. a company renowned for its specialty seafood stores, recently observed a downturn in profits at four of itsoutlets. This decline has been attributed to an over-saturated market in these areas. Consequently, the management team initiatevaluation to determine if there's a need to recognize impairment on the assets of these affected stores. The following data wascompiledProjected undiscounted cash flows from these assets are estimated to be $16.5 millionCurrent market assessments place the fair value of these assets at $14.9 million.The recorded book value of these assets stands at $12.5 millionRequired:Assess and calculate the impairment loss, if any, that Atlantis Seafoods Co. must recognize for these assetsNote: Enter your answer in millions rounded to 1 decimal place (.e., 5,500,000 should be entered as 5.5).million

Impairment loss refers to a permanent decrease in the market value of an asset due to changes in…

68 Book Value of these assets stands at $17.5 million Required: Assess and calculate the impairment loss, if any, that Atlantis Seafoods Co. must recognize for these assets Note: Enter your answer in millions rounded to 1 decimal place (.e., 5,500,000 should be entered as 5.5).

68 Book Value of these assets stands at $17.5 million Required: Assess and calculate the impairment loss, if any, that Atlantis Seafoods Co. must recognize for these assets Note: Enter your answer in millions rounded to 1 decimal place (.e., 5,500,000 should be entered as 5.5).

Managerial Accounting: The Cornerstone of Business Decision-Making

7th Edition

ISBN:9781337115773

Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Chapter14: Statement Of Cash Flows

Section: Chapter Questions

Problem 54P

See similar textbooks

Similar questions

QuickServe, a chain of convenience stores, was experiencing some serious cash flow difficultiesbecause of rapid growth. The company did not generate sufficient cash from operating activities tofinance its new stores, and creditors were not willing to lend money because the company had notproduced any income for the previous three years. The new controller for QuickServe proposeda reduction in the estimated life of store equipment to increase depreciation expense; thus, “wecan improve cash flows from operating activities because depreciation expense is added back onthe statement of cash flows.” Other executives were not sure that this was a good idea because theincrease in depreciation would make it more difficult to report positive earnings: “Without income,the bank will never lend us money.”Required:What action would you recommend for QuickServe? Why?
Collinsworth LTD., a U.K. company, prepares its financial statements according to International Financial Reporting Standards. Late in its 2021 fiscal year, a significant adverse change in business climate indicated to management that the assets of its appliance division may be impaired. The following data relate to the division’s assets: (£ in millions)Book value £220Undiscounted sum of estimated future cash flows 210Present value of future cash flows 150Fair value less cost to sell (determined by appraisal) 145 Required:1. What amount of impairment loss, if any, should Collinsworth recognize?2. Assume that Collinsworth prepares its financial statements according to U.S. GAAP and that fair value less cost to sell…
Collison and Ryder Company (C&R) has been experiencing declining market conditions for its sportswear division. Management decided to test the assets of the division for possible impairment. The test revealed the following: book value of division’s assets, $29.7 million; fair value of division’s assets, $22.6 million; undiscounted sum of estimated future cash flows generated from the division’s assets, $30.3 million.
Chadwick Enterprises, Inc., operates several restaurants throughout the Midwest. Three of its restaurants located in the center of a large urban area have experienced declining profits due to declining population. The company’s management has decided to test the assets of the restaurants for possible impairment. The relevant information for these assets is presented below. Book value $6.5 millionEstimated undiscounted sum of future cash flows 4.0 millionFair value 3.5 million Required:1. Determine the amount of the impairment loss, if any.2. Repeat requirement 1 assuming that the estimated undiscounted sum of future cash flows is $6.8 million and fair value is $5 million.
Vegetarian Delights has been experiencing declining market conditions for its specialty foods division. Management decided to test the operational assets of the division for possible impairment. The test revealed the following: book value of the division’s assets, $33.5 million; fair value of the division’s assets, $30 million; sum of estimated future cash flows generated from the division’s assets, $38 million. What amount of impairment loss, if any, should Vegetarian Delights record?
An analysis of the annual financial statements of Conner Corporation reveals the following:a. The company had a $5 million extraordinary loss from insurance proceeds received due to atornado that destroyed a factory building.b. Depreciation for the year amounted to $8 million.c. During the year, $2 million in cash was transferred from the company’s checking account intoa money market fund.d. Accounts receivable from customers increased by $4 million over the year.e. Cash received from customers during the year amounted to $167 million.f. Prepaid expenses decreased by $1 million over the year.g. Dividends declared during the year amounted to $7 million; dividends paid during the yearamounted to $6 million.h. Accounts payable (to suppliers of merchandise) increased by $2.5 million during the year.i. The liability for accrued income taxes payable amounted to $5 million at the beginning of theyear and $3 million at year-end.In the computation of net cash flows from operating activities by…
Despite having $1,050,000 in equipment (net) and $565,000 in inventory, Napanee Limited is thoughtby market analysts to be in poor financial condition. This is primarily due to its low cash reserves of$56,500; high accounts receivables of $750,000; and high accounts payable of $555,500. Commonshares at Napanee Limited total $1,500,000 and there is a note payable of $100,000. All figuresreferenced above are as Napanee Limited’s latest fiscal year-end (March 31, 2018). Assume any residual“Liabilities and Equities” pertain to retained earnings.During discussions between Napanee Limited and Bancroft Incorporated (a company looking toacquire Napanee Limited as a CGU under IFRS), both parties agreed that the fair value of the inventorywas $550,000; the fair value of receivables was $700,000; and that equipment was undervalued by$100,000.Bancroft Incorporated has agreed to purchase Napanee Limited for $3,500,000.Required(a) With respect to Bancroft Incorporated’s purchase of Napanee Limited,…
Collison and Ryder Company (C&R) has been experiencing declining market conditions for its sportswear division. Management decided to test the assets of the division for possible impairment. The test revealed the following: book value of division’s assets, $29.7 million; fair value of division’s assets, $22.6 million; undiscounted sum of estimated future cash flows generated from the division’s assets, $25.6 million. What amount of impairment loss should C&R report in its income statement? Note: Enter your answer in millions rounded to 1 decimal place (i.e., 3,300,000 should be entered as 3.3).
Chadwick Enterprises, Incorporated, operates several restaurants throughout the Midwest. Three of its restaurants located in the center of a large urban area have experienced declining profits due to declining population. The company’s management has decided to test the assets of the restaurants for possible impairment. The relevant information for these assets is presented below at the end of 2024. Book value $ 7.1 million Estimated undiscounted sum of future cash flows 4.3 million Fair value 3.8 million Required: Determine the amount of the impairment loss, if any, reported in the 2024 income statement. Determine the reported book value of the assets in the year-end 2024 balance sheet. Determine the amount of the impairment loss assuming that the estimated undiscounted sum of future cash flows is $7.4 million and fair value is $5.3 million. Note: Enter your answers in millions rounded to 1 decimal place, (i.e., 5,500,000 should be entered as 5.5).
The draft financial statements of Plethora plc for the year to 31 December 20X9 are being prepared and the accountant has requested your advice on dealing with the following issues. Plethora plc owns a retail business which has suffered badly during the recession. Plethora plc treats this business as a separate cash generating unit. The carrying amounts of the assets comprising the retail business are: Building: $900,000 Plant and equipment: $300,000 Inventory: $70,000 other current assets: $130,000 goodwill: 40,000 An impairment review has been carried out as at 31 December 20X9 and the recoverable amount of the cash generating unit is estimated at $1.3m. What will be the carrying amount of the building and inventory after the impairment loss has been accounted for?
Collison and Ryder Company (C&R) has been experiencing declining market conditions for its sportswear division. Management decided to test the assets of the division for possible impairment. The test revealed the following: book value of division’s assets, $27.3 million; fair value of division’s assets, $21.4 million; undiscounted sum of estimated future cash flows generated from the division’s assets, $28.4 million. What amount of impairment loss should C&R report in its income statement? Note: Enter your answers in whole dollars, and not in millions.
Consolidated Natural Gas Company (CNG), with corporate headquarters in Pittsburgh, Pennsylvania, is one of the largest producers, transporters, distributors, and marketers of natural gas in North America. Periodically, the company experiences a decrease in the value of its gas- and oil-producing properties, and a special charge to income was recorded in order to reduce the carrying value of those assets. Assume the following information. In 2016, CNG estimated the cash inflows from its oil- and gas-producing properties to be $375,000 per year. During 2017, the write-downs described above caused the estimate to be decreased to $275,000 per year. Production costs (cash outflows) associated with all these properties were estimated to be $125,000 per year in 2016, but this amount was revised to $155,000 per year in 2017.Instructions(Assume that all cash flows occur at the end of the year.)(a) Calculate the present value of net cash flows for 2016–2018 (three years), using the 2016…