At the beginning of 2014, Metatec Inc. acquired Ellison Technology Corporation f

Question

At the beginning of 2014, Metatec Inc. acquired Ellison Technology Corporation for $540 million. In addition to cash, receivables, and inventory, the following assets and their fair values were also acquired:

     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 2016, a change in business climate indicated to management that the assets of Ellison might be impaired. The following amounts have been determined:

*After first recording any impairment losses on plant and equipment and the patent.

Compute the book value of the plant and equipment and patent at the end of 2016. (Enter your answers in millions.)

book value

patent: _____ million

Determine the amount of any impairment loss to be recorded, if any, for the three assets. (Enter your answers in millions.)

plant and equipment: _____ million

patent: ____ million

goodwill ____ million

At the beginning of 2014, Metatec Inc. acquired Ellison Technology Corporation for $540 million. In addition to cash, receivables, and inventory, the following assets and their fair values were also acquired:

Explanation / Answer

Answer:1 Book value:

Dep on Plant and equipment= ($144/10)=$14.4 per year

Book value of plant and equipment =144-(14.4*3)

=100.8

Amortization on patnt=$34/5=6.8 per year

book value of patent=$34-($6.8*3 years)=13.6

Answer:4 Impairment Loss   

Plant and equipment= $46.8 million ($100.8-$54)    

Patent $1.6 ($13.6-12)

Goodwill $56

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