Presented below is net asset information related to the Tamarisk Division of San

Question

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

The purpose of the Tamarisk 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 $445 million. Management has also received an offer to purchase the division for $335 million. All identifiable assets’ and liabilities’ book and fair value amounts are the same.

Prepare the journal entry to record the impairment at December 31, 2017. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

cash 59 accounts receivable 208 PPE (net) 2603 Goodwill 209 Less: Notes payable (2598) Net assets 481

Explanation / Answer

All amount in $ million

Journal Entry :-

Working Note 1 :- Carring Amount of net Goodwill = Net assets - Goodwill

= 481 - 209

= 272

Working Note 2 :- Loss of Impairment :-

Date Particulars Debit Credit Dec. 31, 2017 Loss on Impairment A/c Dr.(Working Note 2) 146 To Goodwill A/c 146 (To Record loss on Impairment)

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