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IFRS; Impairment; property, plant, and equipment
• LO11–8, LO11–10
IFRS
Collinsworth LTD., a U.K. company, prepares its financial statements according to International Financial Reporting Standards. Late in its 2018 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 | £220 |
Undiscounted sum of estimated future |
210 |
Present value of future cash flows | 150 |
Fair 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 approximates fair value. What amount of impairment loss, if any, should Collinsworth recognize?
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Chapter 11 Solutions
Connect Access Card for Intermediate Accounting
- Exercise 11-30 (Algo) Impairment; property, plant, and equipment [LO11-8] General Optic Corporation operates a manufacturing plant in Arizona. Due to a significant decline in demand for the product manufactured at the Arizona site, an impairment test is deemed appropriate. Management has acquired the following information for the assets at the plant: Cost Accumulated depreciation General's estimate of the total cash flows to be generated by selling the products manufactured at its Arizona plant, not discounted to present value The fair value of the Arizona plant is estimated to be $12 million. Required: 1. Determine the amount of impairment loss. 2. If a loss is indicated, prepare the entry to record the loss. 3. & 4. Determine the amount of impairment loss assuming that the estimated undiscounted instead of $15.4 million and (4) $20.5 million instead of $15.4 million. Complete this question by entering your answers in the tabs below. Req 1 $ 34.5 million. $ 14.4 million $ 15.4 million…arrow_forwardExercise 11-30 (Algo) Impairment; property, plant, and equipment [LO11-8] General Optic Corporation operates a manufacturing plant in Arizona. Due to a significant decline in demand for the product manufactured at the Arizona site, an impairment test is deemed appropriate. Management has acquired the following information for the assets at the plant: Cost Accumulated depreciation General's estimate of the total cash flows to be generated by selling the products manufactured at its Arizona plant, not discounted to present value The fair value of the Arizona plant is estimated to be $19.5 million. Required: 1. Determine the amount of impairment loss. 2. If a loss is indicated, prepare the entry to record the loss. 3. & 4. Determine the amount of impairment loss assuming that the estimated undiscounted sum of future cash flows is (3) $19.5 million instead of $18.4 million and (4) $34.25 million instead of $18.4 million. Complete this question by entering your answers in the tabs below.…arrow_forwardExercise 4-6 (Algo) Discontinued operations [LO4-4, 4-5] Chance Company had two operating divisions, one manufacturing farm equipment and the other office supplies. Both divisions are considered separate components as defined by generally accepted accounting principles. The farm equipment component had been unprofitable, and on September 1, 2021, the company adopted a plan to sell the assets of the division. The actual sale was completed on December 15, 2021, at a price of $740,000. The book value of the division's assets was $1,290,000, resulting in a before-tax loss of $550,000 on the sale. The division incurred a before-tax operating loss from operations of $160,000 from the beginning of the year through December 15. The income tax rate is 25%. Chance's after-tax income from its continuing operations is $690,000. Required: Prepare an income statement for 2021 beginning with income from continuing operations. Include appropriate EPS disclosures assuming that 100,000 shares of common…arrow_forward
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- As of December 31, 2020, Gamma Corporation is currently evaluating three of its plant assets currently used in operations for possible impairments. Gamma is a U.S.- based company that complies with U.S. GAAP. Plant Asset # 201 #202 # 203 Ⓒ$50,000 $425,000 $245,000 4 Book $415,000 Undiscounted Future Cash Flows $400,000 $450,000 $465,000 $420,000 $600,000 $400,000 Determine the amount of the impairment loss (if any) Gamma would report on their current year income statement if they intend to continue to use Plant Assets #201, # 202, and # 203. Value Fair Value $390,000 $400,000 $250,000arrow_forwardEXERCISE I 6 Red Inc. has experienced several poor earnings and has several assets on its books that are undervalued. It desires to revalue its assets and eliminate the deficit. At December 31,2020, the company owns the following identifiable assets: Cost Accumulated Book value Fair value Depreciation Inventory P IM P IM P 0.7M Land 5 M 5 M 6.5 M Buildings 7.5 M Р 3.5 М 4.0 M 5.0 M 1.5 M Machinery & Equipment 3.5 М 2 M 2.2 M The statement of financial position on December 31,2020, reported a deficit of P 2,000,000. REQUIRED: Journal entries to record the quasi-reorganization.arrow_forwardProblem 8-7A (Algo) Record contingencies (LO8-5) The ink-jet printing division of Vericom Printing has grown tremendously in recent years. Assume the following transactions related to the ink-jet division occur during the year ended December 31, 2024. 1. Vericom Printing is being sued for $10.1 million by Addamax. Plaintiff alleges that the defendants formed an unlawful joint venture and drove it out of business. The case is expected to go to trial later this year. The likelihood of payment is reasonably possible. 2. Vericom Printing is the plaintiff in a(n) $8.1 million lawsuit filed against a competitor in the high-end color-printer market. Vericom Printing expects to win the case and be awarded between $5.6 and $8.1 million. 3. Vericom Printing recently became aware of a design flaw in one of its ink-jet printers. A product recall appears probable. Such an action would likely cost the company between $410,000 and $810,000. Required: Determine the appropriate way Vericom Printing…arrow_forward
- Y3 (e) Kwik Ltd (Kwik) runs a unit in Ablekuma Metropolis that has suffered a massive drop in income due to failure in its technology on 1 January 2018. As a result, the following carrying amounts were recorded in the books immediately before the impairment test. GH¢million Goodwill 20 Technology 5 17 Equipment 10 Land 50 Buildings 30 Other net assets 40 The value in use of the unit is estimated at GH¢85 million, and Kwik has received an offer of GH¢75 million for the unit. The technology is worthless, following its complete failure. Other net assets include inventory, receivables and payables. It is considered that the carrying amount of other net assets is a reasonable representation of its net realizable value. Required: In accordance with IAS 36: impairment of assets, show the accounting treatment for the above transactions.arrow_forwardP 8-8 Supplemental LIFO disclosures; CaterpillarLO8-4,LO8-6 Real World Financials Caterpillar, Inc., is one of the world's largest manufacturers of construction, mining, and forestry machinery. The following disclosure note is included in the company's 2019 financial statements: C. Inventories ($ in millions) Inventories are stated at the lower of cost or net realizable value. Cost is principally determined using the last-in, first-out (LIFO) method. The value of inventories on the LIFO basis represented about 60 percent and 65 percent of total inventories at December 31, 2019 and 2018, respectively. If the FIFO (first-in, first-out) method had been in use, inventories would have been $2,086 million and $2,009 million higher than reported at December 31, 2019 and 2018, respectively. Required: 1. The company reported LIFO cost of goods sold of $36,630 million. Calculate the amount that would be reported for cost of goods sold had Caterpillar used the FIFO inventory method for all of its…arrow_forwardExercise 4-8 (Algo) Discontinued operations; disposal in subsequent year [LO4-4] Kandon Enterprises, Incorporated, has two operating divisions; one manufactures machinery and the other breeds and sells horses. Both divisions are considered separate components as defined by generally accepted accounting principles. The horse division has been unprofitable, and, on November 15, 2024, Kandon adopted a formal plan to sell the division. The sale was completed on April 30, 2025. At December 31, 2024, the component was considered held for sale. Consider the following: On December 31, 2024, the company’s fiscal year-end, the book value of the assets of the horse division was $438,000. On that date, the fair value of the assets, less costs to sell, was $380,000. The before-tax loss from operations of the division for the year was $320,000. The after-tax income from continuing operations for 2024 was $580,000. The company’s effective tax rate is 25% . Required: Prepare a partial income…arrow_forward
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