TEAL MOUNTAIN DIVISION NET ASSETS AS OF DECEMBER 31, 2017 (IN MILLIONS) $60 209

Question

TEAL MOUNTAIN DIVISION
NET ASSETS
AS OF DECEMBER 31, 2017
(IN MILLIONS)

$60

209

2,604

210

(2,599

)

Account Titles and Explanation

Debit

Credit

SHOW LIST OF ACCOUNTS

LINK TO TEXT

LINK TO TEXT

Account Titles and Explanation

Debit

Credit

Presented below is net asset information related to the Teal Mountain Division of Santana, Inc.

TEAL MOUNTAIN DIVISION
NET ASSETS
AS OF DECEMBER 31, 2017
(IN MILLIONS)

Cash

$60

Accounts receivable

209

Property, plant, and equipment (net)

2,604

Goodwill

210

Less: Notes payable

(2,599

)

Net assets $484
The purpose of the Teal Mountain Division is to develop a nuclear-powered aircraft. If successful, traveling delays associated with refueling could be substantially reduced. Many other benefits would also occur. To date, management has not had much success and is deciding whether a write-down at this time is appropriate. Management estimated its future net cash flows from the project to be $415 million. Management has also received an offer to purchase the division for $330 million. All identifiable assets’ and liabilities’ book and fair value amounts are the same.

Explanation / Answer

Solution (1) - Journal Entry

Working

Journal Entry

Solution (2) - No Entry.

Adjusted carrying value of goodwill is the new accounting basis. Hence the loss in not permitted

Particulars Amount (in Dollar Million) Fair Value of Division $330 - Carrying amount of division (net of goodwill) ($484 - $210) $274 Implied Value of Goodwill $56 - Carrying value of goodwill $210 Loss on Impairment $154

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