Required information (The following information applies to the questions displayed below] El Dorado Foods Inc. owns a chain of specialty stores in the Pacific Northwest. Recently, four of the stores have experienced declining profits due to market saturation in the area. As a result, management gathered data about possible impairment of the assets of the stores. The information gathered was as follows Book value: $1775 million Fair value (Present value of future cash flows) $14.95 million Undiscounted sum of future cash flows: $16.75 million Required: Determine the amount, if any, of the impairment loss that El Dorado must recognize on these assets. (Enter your answer in millions rounded to 2 decimal places (i.e. 5,500,000 should be entered es 5.50).) Impairment loss million

Required information (The following information applies to the questions displayed below] El Dorado Foods Inc. owns a chain of specialty stores in the Pacific Northwest. Recently, four of the stores have experienced declining profits due to market saturation in the area. As a result, management gathered data about possible impairment of the assets of the stores. The information gathered was as follows Book value: $1775 million Fair value (Present value of future cash flows) $14.95 million Undiscounted sum of future cash flows: $16.75 million Required: Determine the amount, if any, of the impairment loss that El Dorado must recognize on these assets. (Enter your answer in millions rounded to 2 decimal places (i.e. 5,500,000 should be entered es 5.50).) Impairment loss million

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter12: Capital Investment Analysis

Section: Chapter Questions

Problem 3MAD

See similar textbooks

Similar questions

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…
Swifty Corp. has decided to expand its operations. The bookkeeper recently completed the following statement of financial position in order to obtain additional funds for expansion: SWIFTY CORP.Statement of Financial PositionFor the Year Ended December 31, 2020 Current assets Cash (net of bank overdraft of $35,000) $ 290,000 Accounts receivable (net) 510,000 Inventory at the lower of cost and net realizable value 551,000 FV-NI investments (at cost—fair value $180,000) 150,000 Property, plant, and equipment Buildings (net) 720,000 Equipment (net) 180,000 Land held for future use 335,000 Intangible assets Goodwill 90,000 Investment in bonds to collect cash flows, at amortized cost 97,000 Prepaid expenses 22,000 Current liabilities Accounts payable 225,000 Notes payable (due next year) 295,000…
Flint Corp. Statement of Financial Position For the Year Ended December 31, 2023 Current assets Cash (net of bank overdraft of $40,000 ) $450,000 Accounts receivable (net) Inventory at the lower of cost and net realizable value FV-NI investments (at cost-fair value $320,000 ) Property, plant, and equipment Buildings (net) 590,000 Equipment (net) 190,000 Land held for future use ,265,000 Intangible assets Goodwill Investment in bonds to collect cash flows, at amortized cost 100,000 Prepaid expenses Current liabilities Accounts payable 365,000 Notes payable (due next year) Pension obligation Rent payable 505,000 511,000 340,000 265,000 Long-term liabilities Bonds payable 681,000 Shareholders' equity Common shares, unlimited authorized, 380,000 issued 380,000 Contributed surplus 210,000 Retained earnings
Xander Inc. has prepared the following sensitivity analysis: Line Item Description Amount Amount Amount Estimated Annual Net Cash Flow $500,000 $600,000 $700,000 Present value of annual net cash flows (× 4.487) $2,243,500 $2,692,200 $3,140,900 Present value of residual value 50,000 50,000 50,000 Total present value $2,293,500 $2,742,200 $3,190,900 Amount to be invested (3,000,000) (3,000,000) (3,000,000) Net present value $(706,500) $(257,800) $190,900 In addition, it has assigned the following likelihoods to the three possible annual net cash flows: $500,000, 70%; $600,000, 20%; and $700,000, 10%. Based on an expected value analysis, which of the following statements is accurate? a. The expected value of the annual net cash flow is $540,000, and the project should be accepted. b. The expected value of the annual net cash flow is $660,000, and the project should be accepted. c. The expected value of the annual net cash flow is $660,000, and the project…
#2 Brett Collins is reviewing his company’s investment in a cement plant. The company paid $15,300,000 five years ago to acquire the plant. Now top management is considering an opportunity to sell it. The president wants to know whether the plant has met original expectations before he decides its fate. The company’s desired rate of return for present value computations is 9 percent. Expected and actual cash flows follow. (PV of $1 and PVA of $1) (Use appropriate factor(s) from the tables provided.) Year 1 Year 2 Year 3 Year 4 Year 5 Expected $ 3,360,000 $ 5,040,000 $ 4,590,000 $ 5,160,000 $ 4,270,000 Actual 2,620,000 2,990,000 4,830,000 3,890,000 3,590,000 Required a.&b. Compute the net present value of the expected and actual cash flows as of the beginning of the investment. (Negative amounts should be indicated by a minus sign. Round your intermediate calculations and final answer to the nearest whole dollar.) Net Present Value…
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…
Which of the following is likely to cause the largest Cash Outflow: Sale of a 30 Story Office building owned by the company for $120 million. Purchase a $20,000 copy machine. Establishing a $50,000 line of credit. An acquisition of a competitor for $1.0 million in stock.
Sheridan Company has recently decided to go public and has hired you as an independent CPA. One statement that the enterprise is anxious to have prepared is a statement of cash flows. Financial statements of Sheridan Company for 2022 and 2021 are provided below. BALANCE SHEETS 12/31/22 12/31/21 Cash $407000 $ 193000 Accounts receivable 362000 214000 Inventory 382000 482000 Property, plant and equipment $609000 $960000 Less accumulated depreciation (321000 ) 288000 (306000 ) 654000 $1439000 $1543000 . Accounts payable $ 176000 $ 97000 Income taxes payable 351000 394000 Bonds payable 359000 602000 Common stock 217000 215000 Retained earnings 336000 235000 $1439000 $1543000 INCOME STATEMENTFor the Year Ended…
Please I will like an answer step by step. Thank you. Given the following sensitivity analysis, which of the following statements is true? Estimated Annual Net Cash Flow $500,000 $600,000 $700,000 Present value of annual net cash flows (× 4.487) $2,243,500 $2,692,200 $3,140,900 Present value of residual value 50,000 50,000 50,000 Total present value $2,293,500 $2,742,200 $3,190,900 Amount to be invested (3,000,000) (3,000,000) (3,000,000) Net present value (706,500) (257,800) 190,900 a.The investment is not justified if the annual net cash flow will be $500,000 or $600,000. b.The annual net cash flow necessary to generate a positive net present value is above $700,000. c.The total amount to be invested is $3,050,000. d.Only an annual net cash flow of $700,000 will allow for a positive residual value.
Swifty Corporation has recently decided to go public and has hired you as an independent CPA. One statement that the enterprise is anxious to have prepared is a statement of cash flows. Financial statements of Swifty Corporation for 2022 and 2021 are provided below. BALANCE SHEETS 12/31/22 12/31/21 Cash $407000 $ 190000 Accounts receivable 360000 214000 Inventory 383000 479000 Property, plant and equipment $607000 $961000 Less accumulated depreciation (318000 ) 289000 (304000 ) 657000 $1439000 $1540000 . Accounts payable $ 175000 $ 95000 Income taxes payable 354000 391000 Bonds payable 358000 600000 Common stock 213500 218000 Retained earnings 338500 236000 $1439000 $1540000 INCOME STATEMENTFor the Year Ended…
SteelTubes had sales of $300 million this year. Expenses were $250 million. Aside from these figures, the company also invested in new mills for carbon steel tubing, complete with peripheral loading, straightening, and coiling equipment plus facility reconfiguration totaling $14 million. Steel Tubes believes the usable life of the mill will be only 7 years, owing to technological advances. There were no other financial considerations. a. Looking strictly at cash flows, what will be reported as the financial gain or loss? Is this a fair representation of financial performance? b. If, for internal financial reporting, the manufacturer writes off equal amounts of the capital investment over the usable life, beginning this year, what will be the reported financial gain or loss?
Assume San Lucas Corporation in MAD 26-1 assigns the following probabilities to the estimated annual net cash flows: a. Compute the expected value of the annual net cash flows. b. Determine the expected net present value of the equipment, assuming a desired rate of return of 10% and the expected annual net cash flows computed in part (a). Use the present value tables (Exhibits 2 and 5) provided in the chapter in determining your answer. c. Based on your results in parts (a) and (b), should San Lucas Corporation invest in the equipment?