lectroboy Enterprises, Inc. operates several stores throughout the western United States. As

part of an operational and financial reporting review in a response to a downturn in its markets,

the company's management has decided to perform an impairment test on five stores

(combined). The five stores' sales have declined due to aging facilities and competition from a

rival that opened new stores in the same markets. Management has developed the following

information concerning the five stores as of the end of fiscal 2016.

Original cost

$36 million

Accumulated depreciation

$10 million

Estimated remaining useful life

4 years

Estimated expected future annual cash flows (not discounted) $4.0 million per year

Appropriate discount rate

5 percent

Accounting

a. Determine the amount of impairment loss, if any, that Electroboy should report for fiscal

2016 and the book value at which Electroboy should report the five stores on its fiscal year

end 2016 balance sheet. Assume that the cash flows occur at the end of each year.

b. Repeat part (a), but instead assume that (1) the estimated remaining useful life is 10 years,

(2) the estimated annual cash flows are $2,720,000 per year, and (3) the appropriate

discount rate is 6 percent.