Question

1. The following information is available for a Gables Enterprise's machinery:

Cost $ 283,000,000

Accumulated depreciation 133,000,000

Estimate of the total cash flows 110,000,000

Present value of estimated future cash flows 94,000,000

Estimated fair value determined by appraisal 140,000,000

1 What is the impairment loss that Gables would report at December 31

a. $40,000

b$ 16,000

c. $56,000

d. $10,000

2. In 2017, Ana Inc, had acquired Demski Co and recorded goodwill of $245 million as a result. The net assets ( including goodwill) from Ana's acquisition of Demski had a 2018 year- end book value of $ million. Ana assessed the fair value of Demski at this date to be $700 million, while the fair value of all of Demski's identifiable tangible and intangible assets (excluding goodwill ) was $ 550 million. The amount of the impairment loss that Ana would record for goodwill at the end of 2018 is:

a 150 million

b $95 million

C $120 million

d. No impairment loss is recognized

Answer 1

1.Impairement loss is recognized when book value exceeds its fair value

=Book Value = 283,000 - 133,000 = 150,000

So impairment loss = 150,000 - 140,000 = 10,000

2.d. No impairment loss is recognized here because fair value exceeds the book value