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At the beginning of 2011, Metatec Inc. acquired Ellison Technology Corporation for $600 million. In addition to cash, receivables, and inventory, the following assets and their fair values were also acquired:
Plant and equipment (depreciable assets) ....... $150 millionPatent ..................... 40 millionGoodwill ..................... 100 millionThe 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 2013, 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 .......... $ 80 millionFair value ...................... 60 millionPatent:Undiscounted sum of future cash flows .......... $ 20 millionFair value ...................... 13 millionGoodwill:Fair value of Ellison Technology ............. $450 millionFair value of Ellison's net assets (excluding goodwill) ....... 390 millionBook value of Ellison's net assets (including goodwill) ..... 470 millionAfter 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 2013.2. When should the plant and equipment and the patent be tested for impairment?3. When should goodwill be tested for impairment?4. Determine the amount of any impairment loss to be recorded, if any, for the three assets.
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a company must incur annual fixed costs of 4000000 and variable costs of 400 per unit and estimates that it can sell
Determine the effect on EZ's accounting equation relative to the sale, collections, and write-offs of accounts receivable during 1007. What is the net realizable value of accounts receivable on December 31, 2007, under each assumption in part (2)?
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