Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Problem 11-12 (Algo) Depreciation and amortization; impairment (LO11-2, 11-4, 11-8) At the beginning of 2019, Metatec Inc. acquired Ellison Technology Corporation for $550 million. In
Problem 11-12 (Algo) Depreciation and amortization; impairment (LO11-2, 11-4, 11-8) At the beginning of 2019, Metatec Inc. acquired Ellison Technology Corporation for $550 million. In addition to cash, receivables, and inventory, the following assets and their fair values were also acquired: Plant and equipment (depreciable assets) Patent Goodwill $145 million 35 million 100 million The 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 2021, 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 Fair value Patent: Undiscounted sum of future cash flows $ 75 million 55 million $ 20 million 12 million Fair value Goodwill: Fair value of Ellison Technology Corporation Fair value of Ellison's net assets (excluding goodwill) Book value of Ellison's net assets (including goodwill) $395 million 340 million 420 million After 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 2021. 4. Determine the amount of any impairment loss to be recorded, if any, for the three assets. Complete this question by entering your answers in the tabs below. Required 1 Required 4 Determine the amount of any impairment loss to be recorded, if any, for the three assets. (Enter your answers in millions. Negative amounts should be indicated by a minus sign.) Plant and equipment Impairment Loss million million Patent Goodwill million
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started