Question 7 of 8 500 points Collis on and Ryder Company CR ha

Question 7 (of 8) 5.00 points Collis on and Ryder Company (C&R;) has been experiencing declining mark et conditions for its sportswear division. Management decided to test the assets of the division for possible impairment. The test revealed the folowing book value of division\'s assets, $28.3 million, fair value of division\'s assets, $21.9 million sum of estimated future cash flows generated from the division\'s assets, $28.9 million. What amount of impairment loss should C&R; recognize? (Enter your answer in whole dollars.) Impairment loss Reterences eBook & Resources Worksheet OType here to se 5 6 7

Solution

Solution: All amounts in $

Answer to 7

C & R Inc : Testing at year end

For the determination of Impairment loss for long lived assets all the following test must apply :

1. Events or changes in circumstances indicate possible loss - this test apply

2. Carrying amount must be more than the sum of the undiscounted cash flows - This is not applicable since the carrying amount 28.3 is less than the undiscounted cash flows of 28.9.

3. Impairmenrt loss would be the carrying amount less fair value - Not applicable since test 2 does not apply.

Impairment loss would be 0.

Answer to 8

Webhelper Inc :At current fiscal year end

For the determination of Impairment loss for Goodwill all the following test must apply :

1. The carrying amount of the Co. must be more thatn the fair value : 44,7m is more tha 41.8 m - This test is passed

2. Calculate the implied fair value of Goodwill = Total fair value of the company less the fair value excl goodwill = 41.8m -31.9m = 9.9 m

3. Check if the carrying amount of goodwill is more than the implied fair value (step2) = 16.8 m is more than 9.9 m. Hence this test is satisfied

4. Impairment loss would be excess remaining in step 3 i.e. 16.8 m - 9.9m i.e. 6.9 million