Presented below is net asset information related to the Salmon Division of Horton, Inc. SALMON DIVISION NET ASSETS AS OF DECEMBER 31, 2020 (IN MILLIONS) Cash $ 50 Receivable 150 Property, plant, and equipment (net) 2,080 Goodwill 160 Less: Notes payable (2,160) Net assets $ 280 The purpose of the Salmon division is to develop a nuclear-powered aircraft. If successful, traveling delays associated with refueling could be substantially reduced. Many other benefits would also occur. To date, management has not had much success and is deciding whether a write-down at this time is appropriate. Management estimated its future net cash flows from the project to be $320 million. Management has also received an offer to purchase the division for $278 million. The identifiable book and fair value amounts of all assets and liabilities are the same. Instructions Prepare the journal entry (if any) to record the impairment at December 31, 2020 At December 31, 2021, it is estimated that the division’s fair value increased to $283 Prepare the journal entry (if any) to record this increase in fair value.
Presented below is net asset information related to the Salmon Division of Horton, Inc. SALMON DIVISION NET ASSETS AS OF DECEMBER 31, 2020 (IN MILLIONS) Cash $ 50 Receivable 150 Property, plant, and equipment (net) 2,080 Goodwill 160 Less: Notes payable (2,160) Net assets $ 280 The purpose of the Salmon division is to develop a nuclear-powered aircraft. If successful, traveling delays associated with refueling could be substantially reduced. Many other benefits would also occur. To date, management has not had much success and is deciding whether a write-down at this time is appropriate. Management estimated its future net cash flows from the project to be $320 million. Management has also received an offer to purchase the division for $278 million. The identifiable book and fair value amounts of all assets and liabilities are the same. Instructions Prepare the journal entry (if any) to record the impairment at December 31, 2020 At December 31, 2021, it is estimated that the division’s fair value increased to $283 Prepare the journal entry (if any) to record this increase in fair value.
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter11: Depreciation, Depletion, Impairment, And Disposal
Section: Chapter Questions
Problem 13P
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Question
Presented below is net asset information related to the Salmon Division of Horton, Inc.
SALMON DIVISION NET ASSETS
AS OF DECEMBER 31, 2020
(IN MILLIONS)
|
Cash |
$ 50 |
|
Receivable |
150 |
|
Property, plant, and equipment (net) |
2,080 |
|
|
160 |
|
Less: Notes payable |
(2,160) |
|
Net assets |
$ 280 |
|
|
|
The purpose of the Salmon division is to develop a nuclear-powered aircraft. If successful, traveling delays associated with refueling could be substantially reduced. Many other benefits would also occur. To date, management has not had much success and is deciding whether a write-down at this time is appropriate. Management estimated its future net
Instructions
- Prepare the
journal entry (if any) to record the impairment at December 31, 2020
- At December 31, 2021, it is estimated that the division’s fair value increased to $283 Prepare the journal entry (if any) to record this increase in fair value.
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