Exercise 12-11 Fred Moss, owner of Moss Interiors, is negotiating for the purcha
ID: 2570879 • Letter: E
Question
Exercise 12-11 Fred Moss, owner of Moss Interiors, is negotiating for the purchase of Oriole Galleries. The balance sheet of Oriole is given in an abbreviated form below ORIOLE GALLERIES BALANCE SHEET AS OF DECEMBER 31, 2017 Assets $104,000 69,900 199,900 Liabilities and Stockholders' Equity Accounts payable Notes payable (long-term) $50,300 303,000 353,300 Cash Land Buildings (net) Equipment (net)174,900Common stock Copyrights (net) Total assets Total liabilities $241,300 29,900 16,000 225,300 $578,600 Retained earnings $578,600 Total liabilities and stockholders' equity Moss and Oriole agree that: 1. Land is undervalued by $30,700 2. Equipment is overvalued by $5,000 Oriole agrees to sell the gallery to Moss for $380,400Explanation / Answer
1)
2)EXpected net realizable value =lower of future cash flow or fair value
lower of 200000 or 104000
104000
Impairment loss :since carrying value is higher than expected value
= 104000-290000= -186000 loss
3)Since implied goodwill is less than carrying value of 430000 ,goodwill is impaired
Impairment loss =Fair value of division -carrying value
= 816000 -870000
= -54000 loss
date Account debit credit cash 104000 Land [69900+30700] 100600 Building 199900 Equipment [174900-5000] 169900 copyright 29900 Goodwill(balancing figure) 129400 Accounts payable 50300 Long term Note payable 303000 cash 380400Related Questions
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