Question

Reposting this question for the 2nd time...please help!

Question: Hello, Please help me with this problem and give an explanation for the correct answer. Thank you...

Hello,

Please help me with this problem and give an explanation for the correct answer. Thank you

At the beginning of 2019, Metatec Inc. acquired Ellison Technology Corporation for $690 million. In addition to cash, receivables, and inventory, the following assets and their fair values were also acquired:

Plant and equipment (depreciable assets)	$	159	million
Patent		49	million
Goodwill		100	million

The plant and equipment are depreciated over a 10-year useful life on a straight-line basis. There is no estimated residual value. The patent is estimated to have a 5-year useful life, no residual value, and is amortized using the straight-line method.

At the end of 2021, a change in business climate indicated to management that the assets of Ellison might be impaired. The following amounts have been determined:

Plant and equipment:
Undiscounted sum of future cash flows	$	89	million
Fair value		69	million
Patent:
Undiscounted sum of future cash flows	$	21	million
Fair value		14	million
Goodwill:
Fair value of Ellison Technology Corporation	$	549	million
Fair value of Ellison's net assets (excluding goodwill)		480	million
Book value of Ellison's net assets (including goodwill)		560	million*

^*After first recording any impairment losses on plant and equipment and the patent.

Required:

1. Compute the book value of the plant and equipment and patent at the end of 2021.
4. Determine the amount of any impairment loss to be recorded, if any, for the three assets.

Complete this question by entering your answers in the tabs below. Required 1 Required 4 Compute the book value of the plant and equipment and patent at the end of 2021. (Enter your answers in millions.) Book Value Plant and equipment 111,300.000 million Patent 19,600.000 million Required 1 Required 4 >

Answer 1

Answer is given below

your calculation of Book value of assets is correct

For impairment loss working you can see below

Plant and Equipment Acquisition value Less: Depreciation for 3 years Book Value at end of 2021 Depreciation Book Value Number of years Depreciation per year 1 Mn Mn $159.00 $47.70 $111.30 $159.00 10 $15.90 Amortisation Book Value Number of years Depreciation per year Patent Acquisition value Less: Amortisation for 3 years Book Value at end of 2021 Mn Mn $49.00 $29.40 $19.60 $49.00 5 $9.80 Impairment Loss 2 Plant and Equipment a) Mn Book Value Undiscounted sum of future cash flow $111.30 $89.00 Since Undiscounted future cash flow is lower asset is therefore impaired Mn Book value Fair Value Impairment Loss of Plant and Equipment $111.30 $69.00 $42.30 b) Book Value Undiscounted sum of future cash flow Patent Mn $19.60 $21.00 Since Undiscounted sum of future cash flow is higher than Book value no Impairment is recognised c) Goodwill Fair value of Ellison Technology Corporation Fair value of Ellison Technology Corporation (Excluding goodwill) Fair value of Goodwill Mn $549.00 $480.00 $69.00 Mn Book value of Goodwill Fair value of Goodwill-calculated above Impairment Loss of Goodwill $100.00 $69.00 $31.00