Question

On August 1, 20x1, Desert, Inc. adopted a plan to discontinue its children's clothing division, which qualifies as a component of the business according to GAAP. The disposal of the division was expected to be concluded by March 30, 20x2. On December 31, 20x1, Desert's fiscal year-end, the following information relative to the discontinued operation was accumulated: Operating Income (pre-tax) of the Component for Jan 1 - Dec 31, 20x1 S 658,000 Net Book Value of the Component at Dec 31, 20x1 Fair Value of the Component Estimated Disposal Costs Income Tax Rate 3,575,000 3,600,000 120,000 30% Because the sale was not complete by December 31, 20x1, Desert had to test the component for impairment. Determine the Impairment Loss (net of tax), that Desert would report in their 20x1 footnotes (if any):

Answer 1

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Impavonient loss Canayuny amount . Necoverable amount amount - Net BV of the component : 35 75000 mornyang Recover anle amount : Higher of: (a) value in me (6) AV ler C10 sume, Desert Ine. detto adopted to descontenuce the operahon, the calculator of value is ure is not required. .. Recoverable amount . KV Peso C70 - 3600000 - 120000 3480000 ... Impalermit losse 3545000 - 3450000 = 95000 : 95000X 70 °6 - $66500, Imparorment loss that of tem]