Sanders Corporation operates a factory in Arizona. Due to a change in business climate, an impairment test is deemed appropriate. Management has acquired the following information for the assets at the plant: Cost$243,000,000 Accumulated depreciation 122,000,000 Estimate of the total cash flows to be generated by selling the productsmanufactured at the Arizona factory, not discounted to present value 110,000,000 Present value of estimated future cash flows 94,000,000 Estimated fair value of the Arizona factory determined by appraisal 90,000,000 Required:1. Determine the amount of impairment loss, if any.2. If a loss is indicated, prepare the entry to record the loss.3. Repeat requirement 1, assuming that Sanders prepares its financial statements according to International Financial Reporting Standards (IFRS). Also assume that the estimated fair value of the factory approximates fair value less costs to sell.

Under US GAAP, impairment loss is recognised when carrying value of asset is more than undiscounted…

Answered: Sanders Corporation operates a factory…

Auditing: A Risk Based-Approach (MindTap Course List)

11th Edition

ISBN:9781337619455

Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Publisher:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Chapter12: Auditing Long-lived Assets And Merger And Acquisition Activity

Section: Chapter Questions

Problem 28RQSC

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Sanders Corporation operates a factory in Arizona. Due to a change in business climate, an impairment test is deemed appropriate. Management has acquired the following information for the assets at the plant:


Cost	$	243,000,000
Accumulated depreciation		122,000,000
Estimate of the total cash flows to be generated by selling the products manufactured at the Arizona factory, not discounted to present value		110,000,000
Present value of estimated future cash flows		94,000,000
Estimated fair value of the Arizona factory determined by appraisal		90,000,000

Required:
1. Determine the amount of impairment loss, if any.
2. If a loss is indicated, prepare the entry to record the loss.
3. Repeat requirement 1, assuming that Sanders prepares its financial statements according to International Financial Reporting Standards (IFRS). Also assume that the estimated fair value of the factory approximates fair value less costs to sell.

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