Question
General Optic Corporation operates a manufacturing plant in Arizona. Due to a significant decline in demand for the product manufactured at the Arizona site, an
General Optic Corporation operates a manufacturing plant in Arizona. Due to a significant decline in demand for the product manufactured at the Arizona site, an impairment test is deemed appropriate. Management has acquired the following information for the assets at the plant: Cost $ 50,500,000 Accumulated depreciation 16,000,000 Generals estimate of the total cash flows to be generated by selling the products manufactured at its Arizona plant, not discounted to present value 18,600,000 The fair value of the Arizona plant is estimated to be $20,000,000. Required: 1. Determine the amount of impairment loss. 2. If a loss is indicated, prepare the entry to record the loss. 3. & 4. Determine the amount of impairment loss assuming that the estimated undiscounted sum of future cash flows is (3) $20,000,000 instead of $18,600,000 and (4) $36,500,000 instead of $18,600,000.
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