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Thefollowing for questions 11 and 12: El Dorado Foods Inc. owns a chain of specialty stores in the Pacific Northwest. Recently, four of the stores
Thefollowing for questions 11 and 12: El Dorado Foods Inc. owns a chain of specialty stores in the Pacific Northwest. Recently, four of the stores have experienced declining profits due to market saturation in the area. As a result, management gathered data about possible impairment of the assets of the stores. The information gathered was as follows Book value: $17.5 million Fair value: $14.9 million Undiscounted sum of future cash flows: $16.5 million 11. When completingthe impairmenttest, STEP 1 would includethe following comparison and A. 17.5> 16.5, therefore there is an impairment-go to step2 B. 17.5 16.5, therefore there is no impairment-you are done. C. 17.5 14.9, therefore there is an impairment go to step2 D. 17.5 14.9, therefore there is no impairment-you are done 12. When completingthe impairmenttest, STEP 2 would include the followingresult: A. Step1 indicated there is no impairment Do nothing else B. Impairment of $1.0 million C. Impairment of $1.6 million D. Impairment of $2.6 million
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