Question

Presented below is net asset information related to the Shamrock Division of Santana, Inc. SHAMROCK DIVISION...

Presented below is net asset information related to the Shamrock Division of Santana, Inc.

SHAMROCK DIVISION
NET ASSETS
AS OF DECEMBER 31, 2017
(IN MILLIONS)

Cash

$67

Accounts receivable

200

Property, plant, and equipment (net)

2,611

Goodwill

217

Less: Notes payable

(2,606

)

Net assets $489


The purpose of the Shamrock 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 $410 million. Management has also received an offer to purchase the division for $335 million. All identifiable assets’ and liabilities’ book and fair value amounts are the same.

a) Prepare the journal entry to record the impairment at December 31, 2017. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

b) At December 31, 2018, it is estimated that the division’s fair value increased to $345 million. Prepare the journal entry to record this increase in fair value. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Homework Answers

Answer #1

SOLUTION

(A) Journal entry-

Date Account titles and Explanation Debit ($) Credit ($)
Dec. 31, 2017 Loss on impairment 154,000,000
Goodwill 154,000,000
(To record impairment at Dec.31, 2017)

Loss on impairment-

Particulars Amount ($)
Fair value of dividends 335,000,000
Carrying amount of division, net of goodwill 272,000,000
Implied value of goodwill 63,000,000
Carrying vaue of goodwill (217,000,000)
Loss on impairment 154,000,000

(B) No entry is needed for this. After a loss is recognised in goodwill impairment the adjusted carrying amount of the goodwill is its new accounting basis. Therefore under SFAS No. 142 subsequent reversal of previously recognised impairment losses is not recognised.

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Exercise 11-16 Presented below is information related to equipment owned by Shamrock Company at December 31,...
Exercise 11-16 Presented below is information related to equipment owned by Shamrock Company at December 31, 2017. Cost $10,260,000 Accumulated depreciation to date 1,140,000 Expected future net cash flows 7,980,000 Fair value 5,472,000 Assume that Shamrock will continue to use this asset in the future. As of December 31, 2017, the equipment has a remaining useful life of 5 years. A. Prepare the journal entry (if any) to record the impairment of the asset at December 31, 2017. (If no...
Presented below is information related to equipment owned by Sheridan Company at December 31, 2017. Cost...
Presented below is information related to equipment owned by Sheridan Company at December 31, 2017. Cost $9,720,000 Accumulated depreciation to date 1,080,000 Expected future net cash flows 7,560,000 Fair value 5,184,000 Assume that Sheridan will continue to use this asset in the future. As of December 31, 2017, the equipment has a remaining useful life of 5 years. a) Prepare the journal entry (if any) to record the impairment of the asset at December 31, 2017. (If no entry is...
Presented below is information related to equipment owned by Whispering Company at December 31, 2017. Cost...
Presented below is information related to equipment owned by Whispering Company at December 31, 2017. Cost $10,350,000 Accumulated depreciation to date 1,150,000 Expected future net cash flows 8,050,000 Fair value 5,520,000 Assume that Whispering will continue to use this asset in the future. As of December 31, 2017, the equipment has a remaining useful life of 4 years. Prepare the journal entry (if any) to record the impairment of the asset at December 31, 2017. (If no entry is required,...
Presented below is information related to equipment owned by Cullumber Company at December 31, 2017. Cost...
Presented below is information related to equipment owned by Cullumber Company at December 31, 2017. Cost $10,890,000 Accumulated depreciation to date 1,210,000 Expected future net cash flows 8,470,000 Fair value 5,808,000 Cullumber intends to dispose of the equipment in the coming year. It is expected that the cost of disposal will be $24,200. As of December 31, 2017, the equipment has a remaining useful life of 4 years. a. Prepare the journal entry (if any) to record the impairment of...
Presented below is net asset information related to the Carlos Division of Santana, Inc. CARLOS DIVISION...
Presented below is net asset information related to the Carlos Division of Santana, Inc. CARLOS DIVISION NET ASSETS AS OF DECEMBER 31, 2017 (IN MILLIONS) Cash $ 54 Accounts receivable 193 Property, plant, and equipment (net) 2603 Goodwill 203 Less: Notes payable (2621) The purpose of the Carlos 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...
Presented below is information related to equipment owned by Cullumber Company at December 31, 2017. Cost...
Presented below is information related to equipment owned by Cullumber Company at December 31, 2017. Cost $10,440,000 Accumulated depreciation to date 1,160,000 Expected future net cash flows 8,120,000 Fair value 5,568,000 Cullumber intends to dispose of the equipment in the coming year. It is expected that the cost of disposal will be $23,200. As of December 31, 2017, the equipment has a remaining useful life of 5 years. Prepare the journal entry (if any) to record the impairment of the...
Presented below is information related to equipment owned by Ivanhoe Company at December 31, 2017. Cost  ...
Presented below is information related to equipment owned by Ivanhoe Company at December 31, 2017. Cost       $10,080,000 Accumulated depreciation to date       1,120,000 Expected future net cash flows       7,840,000 Fair value       5,376,000 Ivanhoe intends to dispose of the equipment in the coming year. It is expected that the cost of disposal will be $22,400. As of December 31, 2017, the equipment has a remaining useful life of 5 years.    Prepare the journal entry (if any) to...
resented below is information related to equipment owned by Pearl Company at December 31, 2017. Cost...
resented below is information related to equipment owned by Pearl Company at December 31, 2017. Cost $10,170,000 Accumulated depreciation to date 1,130,000 Expected future net cash flows 7,910,000 Fair value 5,424,000 Assume that Pearl will continue to use this asset in the future. As of December 31, 2017, the equipment has a remaining useful life of 4 years. a. Prepare the journal entry (if any) to record the impairment of the asset at December 31, 2017. (If no entry is...
Presented below is information related to equipment owned by Wildhorse Company at December 31, 2020. Cost...
Presented below is information related to equipment owned by Wildhorse Company at December 31, 2020. Cost $10,620,000 Accumulated depreciation to date 1,180,000 Expected future net cash flows 8,260,000 Fair value 5,664,000 Wildhorse intends to dispose of the equipment in the coming year. It is expected that the cost of disposal will be $23,600. As of December 31, 2020, the equipment has a remaining useful life of 5 years. a.)Prepare the journal entry (if any) to record the impairment of the...
Presented below is information related to copyrights owned by Cullumber Company at December 31, 2020. Cost...
Presented below is information related to copyrights owned by Cullumber Company at December 31, 2020. Cost $8,590,000 Carrying amount 4,430,000 Expected future net cash flows 4,190,000 Fair value 3,330,000 Assume that Cullumber Company will continue to use this copyright in the future. As of December 31, 2020, the copyright is estimated to have a remaining useful life of 10 years. Prepare the journal entry to record the impairment of the asset at December 31, 2020. The company does not use...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT