Yachting in Paradise. I provide executive South Pacific. Yache 2011, the company $15 million. Yacht and a $3 million which can be arranged cash flows of $2.7 m 2017 the company faced a recession was depre what was really impacting attention-phenomenon: Sic Problems / Disc lise, Inc., was founded late in 2010 by retired Admiral Andy Willits to ve retreats aboard a luxury yacht with ports of call scattered around the Yachting in Paradise is a U.S. firm and follows U.S. GAAP. On January 2. mpany purchased the Sarah Mitcheltree, an Azimut 116 super yacht, form De Yachting in Paradise expects the Sarah Mitcheltree to have a life of 15 years illion residual value, the company uses straight-line depreciation Charters. arranged for periods lasting up to a month, are expected to generate annual net 52.7 million. Business met expectations for the first few years, but by early many faced a significant reduction in its future cash flows. The worldwide uas depressing charters as client companies slashed discretionary spending, but really impacting Yachting in Paradise's prospects was a new---and rapidly gaining phenomenon: Sick Yacht Syndrome. Norwalk Virus, bilge odors, flesh eating mould, yeast, holding tank odors, VOC's, stale air, and diesel bacteria are all ir problems on a yacht. While Yachting in Paradise has yet to experience any of symptoms on its yacht, a rash of highly publicized incidents on a larger competitor's fleet was having a ripple effect. Using probability-weighted cash flow forecasts, Yachting in Paradise now estimates that its annual net cash flows will be a disappointing $1.05 million for the next nine years and have so salvage value. Knowing that times were tough in the charter yacht business, a yacht broker that specializes in purchasing used luxury yachts recently offered the company $6 million for the Sarah Mitcheltree. Willits takes some com- fort in knowing that at least the present value of the revised cash flows is $6.6 million, so the company will be better off by "sailing on." Required: 1. What circumstances should prompt Yachting in Paradise, Inc., to perform an asset impair- ment test? 2. Is the Sarah Mitcheltree impaired? Why or why not? If the asset is impaired, how much loss should be recognized? . Prepare any journal entry necessary based on your answer in requirement 2. * If by early 2019 an economic recovery and a widely publicized cure for Sick Yacht Syndrome restore demand for executive yachting retreats, will this impact any entry made in requirement 3? Assume the recoverable amount at this time equals $8 million and that the original residual value remains unchanged. Would your answer to requirement 4 be different if the recoverable amount equaled $10 million? Question is perfectly clear, if you cannot answer, pass it along to someone who can