Cost Method: Assessing Impairment of Value; Time to Bite the Bullet? Sebco, a 100%-owned cre¬

ated subsidiary of Pebco, has total stockholder’s equity of $300,000, which is $200,000 below the parent’s initial capital investment of $500,000. Pebco uses the cost method to account for its in¬ vestment in Sebco.

Required How would you go about assessing whether an impairment in value has occurred and whether a write-down is appropriate? In the absence of an outright offer from a potential buyer, what analy¬

sis would you perform to support an assumption or contention that the subsidiary probably could be sold to a willing buyer for at least $500,000?