Chapter 12, Problem 12.1E

Tangible Asset Impairment. Henne Optical Corporation reported the following information regarding long-term operating assets for its Lens Manufacturing Operations:

Description	Canning Value	Estimated Fair Value
Factory building (used in several segments)	$10,000,000
Less: Accumulated depreciation	(4,500,000)
Net book value	$ 5,500,000	$ 8,900,000
Land	$ 7,000,000	$14,000,000
Lens manufacturing equipment	$ 2,100,000
Less: Accumulated depreciation	(600,000)
Net book value	$ 1,500,000	$ 1,100,000
Lens polishing equipment	$ 3,000,000
Less: Accumulated depreciation	(1,200,000)
Net book value	$1,800,000	$ 1,625,000
General factory equipment (used in several segments)	$6,500,000
Less: Accumulated depreciation	(4,000,000)
Net book value	$ 2,500,000	$ 2.400.000
Delivery trucks (used in several segments)	$ 1,750,000
Less: Accumulated depreciation	(300,000)
Net book value	$1,450,000	$ 1,125,000
Total net fixed assets	$19,750,000

Recent advances in technology have rendered the company’s lens manufacturing operations nearly obsolete. Management projects the following future cash flows for its lens manufacturing operations.

Future Period	Cash-Flow Projection
Year 1	$1,200,000
Year 2	750,000
Year 3	400,000
Year 4	350,000
Year 5	300,000
Total	$3,000,000

Required

1. a. Determine the asset group for purposes of impairment testing and justify your decision.
2. b. Compute the impairment loss for the asset group identified in part (a) for the current year, if any.
3. c. Prepare the journal entry to record the impairment loss, if needed.