Assuming that the estimated undiscounted sum of future cash

Assignment Help Accounting Basics

Reference no: EM131020819

Chadwick Enterprises, Inc., operates several restaurants throughout the Midwest. Three of its restaurants located in the center of a large urban area have experienced declining profits due to declining population. The company’s management has decided to test the assets of the restaurants for possible impairment. The relevant information for these assets is presented below.

Book value	$	7.5	million
Estimated undiscounted sum of future cash flows		4.5	million
Fair value		4.0	million

Required:

1. Determine the amount of the impairment loss. (Enter your answer in millions rounded to 1 decimal place, (i.e., 5,500,000 should be entered as 5.5).)

2. Determine the amount of the impairment loss assuming that the estimated undiscounted sum of future cash flows is $7.8 million and fair value is $5.5 million.

Reference no: EM131020819

Questions Cloud

Capital structure-based on current market values : Capital Co. has a capital structure, based on current market values, that consists of 40 percent debt, 3 percent preferred stock, and 57 percent common stock. If the returns required by investors are 8 percent, 11 percent, and 19 percent for the debt..

Based on the free cash flow valuation model : Based on the free cash flow valuation model, the value of Weidner Co.'s operations is $1,200 million. The company's balance sheet shows $80 million in accounts receivable, $60 million in inventory, and $100 million in short-term investments that are ..

Discuss the merits of this catch-up strategy : Forty-year old employee has never before belonged to a defined-contribution retire- ment plan. Upon seeing the investment alternatives available in the plan, she deter- mines that she needs to tilt her portfolio toward aggressive growth funds to make..

The firms invoice their products in their local currency : Assume the Hong Kong dollar (HK$) value is tied to the U.S. dollar and will remain tied to the U.S. dollar. Last month, a HK$ = 0.25 Singapore dollars. Today, a HK$ = 0.30 Singapore dollars. Assume that the firms invoice their products in their local..

Assuming that the estimated undiscounted sum of future cash : The company’s management has decided to test the assets of the restaurants for possible impairment. The relevant information for these assets is presented below.

An investor holds an aggressive growth mutual fund : An investor holds an aggressive growth mutual fund and was forced to sell it at an inop- portune time when the fund had lost a considerable amount of money. She is upset at being forced out of the fund and claims that this endangers her ability to me..

What are some sources of operating and financial leverage : Smith Company and Jones Company each sell 12,000 bottles at $ 3.00 per bottle. Production costs are $9,000 fixed costs plus $1 per bottle. Calculate the operating income (EBIT) for both companies. Using the information in Exercise 1, calculate the ea..

With living expenses that will grow with inflation : For an individual planning to retire in ten years, with a thirty-year life expectancy in retirement, and with living expenses that will grow with inflation, what is the risk-free investment?

Call either of the two perpetual bond issues : Charles River Associates is considering whether to call either of the two perpetual bond issues the company currently has outstanding. If the bond is called, it will be refunded, that is, a new bond issue will be made with a lower coupon rate. The pr..

User Account

All Pages