Case Study

LP 1.2 Case Study Accounting A) Determine the amount of violate hurt, if any, that Electroboy should modification over for pecuniary 2011 and the disc assess at which Electroboy should report the 5 stores on its fiscal year- revoke 2011 sense of balance sheet. Assume that the cash in hang ups occur at the contain of each year. The deadening loss look on that should be inform for the 5 stores at the end of fiscal 2011 is $17,200,000. Carrying amount 36 one thousand one one thousand million million million (4x10million) = -4,000,000 Book value Undiscounted pass judgment cash flow = 4 x 4.0 million = 16,000,000 for altogether the years. Fair value = 4.0 million x 3.3 = 13,200,000P = A/ (1+nr) =4 million / (1 + 4 x .05) = 4 million / 1.2 = 3.3 Impairment value = fair value minus set aside value = 13,200,000 - -4,000,000 = 17,200,000 B) Repeat part A but figure of assume that (1) the estimated remaining useful life is 10 years, (2) the estimated one-year cash flows $2,720,000 per year, and (3) the appropriate discount rate is 6%. The impairment loss value that should be reported for the five stores at the end of fiscal 2011 is $4,624,064,000,000 Carrying amount = 36 million (10 x 10 million) = (-64 million) - book value Undiscounted expected cash flow = 10 x 2,720,000 = 27,200,000 for all years.

Fair value = 2,720,000 x 1,700,000 = 4,624,000,000,000 P= A / (1 + nr) =2,720,000 / (1 + 10 x .06)= 2,720,000 / 1.6= 1,700,000 Impairment value = fair value book value = 4,624,000,000,000 - -64 million = 4,624,064,000,000 perspicacity psychology As sume that you are a financial analyst and y! ou get in in a host ejaculate with Electroboy focus in early 2012 (before Electroboy closes the books on fiscal 2011). During the conference call, you learn that management is considering selling the five stores, but the sales event wont likely be completed until the certify quarter of fiscal 2012. Briefly discuss what implications this would have for Electroboys 2011 financial statements....If you wish to get a full essay, indian lodge it on our website: OrderCustomPaper.com

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