Chadwick Enterprises, Inc., operates several restaurants throughout the Midwest. Three of its restaurants located in the...

Chadwick Enterprises, Inc., operates several restaurants throughout the Midwest. Three of its restaurants located in the center of a large urban area have experienced declining profits due to declining population. The company’s management has decided to test the assets of the restaurants for possible impairment. The relevant information for these assets is presented below.


Book value	$	8.5	million
Estimated undiscounted sum of future cash flows		5.0	million
Fair value		4.5	million

Required:
1. Determine the amount of the impairment loss.
2. Determine the amount of the impairment loss assuming that the estimated undiscounted sum of future cash flows is $8.8 million and fair value is $6.0 million.

(Negative amounts should be indicated by a minus sign. Enter your answers in millions rounded to 1 decimal place, (i.e., 5,500,000 should be entered as 5.5)).

Solutions

Expert Solution

Answer- 1)- The amount of the impairment loss = $4 million.

Explanation- The impairment loss will be recognized when book value is exceed from estimated undiscounted sum of future cash flows.

Book value of assets = $8.5 million

Estimated undiscounted sum of future cash flows = $5.0 million.

Impairment loss = Book value of assets- Fair value of assets

= $8.5 million - $4.5 million

= $4 million.

2)- The amount of the impairment loss = Nil.

Explanation- There is no impairment loss because estimated undiscounted sum of future cash flows is exceed from book value of assets.

Book value of assets = $8.5 million

Estimated undiscounted sum of future cash flows = $8.8 million.

ekkarill92 answered 1 year ago

Next > < Previous

Related Solutions

Electroboy Enterprises, Inc. operates several stores throughout northern Belgium and the southern part of the Netherlands....

Electroboy Enterprises, Inc. operates several stores throughout northern Belgium and the southern part of the Netherlands. As part of an operational and financial reporting review in a response to a downturn in it markets, the company’s management has decided to perform an impairment test on five stores (combined). The five stores’ sales have declined due to aging facilities and competition from a rival that opened new stores in the same markets. Management has developed the following information concerning the five...

Sunland Enterprises, Inc. operates several stores throughout the western United States. As part of an operational...

Sunland Enterprises, Inc. operates several stores throughout the western United States. As part of an operational and financial reporting review in a response to a downturn in its markets, the company’s management has decided to perform an impairment test on five stores (combined). The five stores’ sales have declined due to aging facilities and competition from a rival that opened new stores in the same markets. Management has developed the following information concerning the five stores as of the end...

II. Accounting, Analysis, and Principles Electroboy Enterprises, Inc. operates several stores throughout northern Belgium and the...

II. Accounting, Analysis, and Principles Electroboy Enterprises, Inc. operates several stores throughout northern Belgium and the southern part of the Netherlands. As part of an operational and financial reporting review in a response to a downturn in it markets, the company’s management has decided to perform an impairment test on five stores (combined). The five stores’ sales have declined due to aging facilities and competition from a rival that opened new stores in the same markets. Management has developed the...

Konig Enterprises, Ltd., owns and operates three restaurants in Vancouver, B.C. The company allocates its fixed...

Konig Enterprises, Ltd., owns and operates three restaurants in Vancouver, B.C. The company allocates its fixed administrative expenses to the three restaurants on the basis of sales dollars. Last year the fixed administrative expenses totaled $880,000 and were allocated as follows: Restaurants Rick’s Harborside Imperial Garden Ginger Wok Total Total sales—Last Year $ 19,270,000 $ 11,280,000 $ 16,450,000 $ 47,000,000 Percentage of total sales 41 % 24 % 35 % 100 % Allocation (based on the above percentages) $ 360,800...

Konig Enterprises, Ltd., owns and operates three restaurants in Vancouver, B.C. The company allocates its fixed...

Konig Enterprises, Ltd., owns and operates three restaurants in Vancouver, B.C. The company allocates its fixed administrative expenses to the three restaurants on the basis of sales dollars. Last year the fixed administrative expenses totaled $970,000 and were allocated as follows: Restaurants Rick’s Harborside Imperial Garden Ginger Wok Total Total sales—Last Year $ 18,060,000 $ 13,440,000 $ 10,500,000 $ 42,000,000 Percentage of total sales 43 % 32 % 25 % 100 % Allocation (based on the above percentages) $ 417,100...

Effect of Stock Split Gino's Restaurant Corporation wholesales ovens and ranges to restaurants throughout the Midwest....

Effect of Stock Split Gino's Restaurant Corporation wholesales ovens and ranges to restaurants throughout the Midwest. Gino's Restaurant Corporation, which had 18,000 shares of common stock outstanding, declared a 3-for-1 stock split. a. What will be the number of shares outstanding after the split? shares b. If the common stock had a market price of $144 per share before the stock split, what would be an approximate market price per share after the split? $ per share A corporation, which...

Pandora Corporation operates several factories in the Midwest that manufacture consumer electronics.

Pandora Corporation operates several factories in the Midwest that manufacture consumer electronics. The December 31, 2021, year-end trial balance contained the following income statement items: Required:Calculate the company’s operating income for the year.

Taco Hut is a restaurant chain that has 3 restaurants located throughout Canada, each of which...

Taco Hut is a restaurant chain that has 3 restaurants located throughout Canada, each of which is an investment centre. The company’s 20x9 financial information is as follows: Restaurant 1 Restaurant 2 Restaurant 3 Revenues $896248 $1149008 $653152 Variable costs 197972 311710 200180 Fixed costs 382796 600843 377907 ROI 36.6% 25.4% 15.6% RI $221470 $177091 $27287 Based on the information above, what are Taco Hut’s total assets? Select one: a. $2274078 b. $2423969 c. $796844 d. $187235

1. ABC Toy Store, Inc. operates several retail locations throughout the county. The data below represents...

1. ABC Toy Store, Inc. operates several retail locations throughout the county. The data below represents its labor cost for the first six months of 2019 at its store. Month Labor Cost Sales ------------ ----------------------- ------------------ January $ 183,000 $ 570,000 February 190,000 600,000 March 178,000 550,000 April 187,000 590,000 May 140,000 400,000 June 167,000 510,000 a. Using the high-low method, estimate the fixed and variable components of labor cost . Express the cost behavior in equation form. b. Draw a...

Mikes Pizza Parlor chains operates restaurants located in a five state area. The most successful locations...

Mikes Pizza Parlor chains operates restaurants located in a five state area. The most successful locations for Mike’s Pizza Parlor are near college campuses. The managers believe that quarterly sales for these restaurants are related positively to the size of the student population. In other words, restaurants located near campuses with a large population tend to generate more sales than those located near campuses with smaller populations. Using regression analysis, what is the dependent and independent variable to use? Explain....

Subjects