CARLOS DIVISION NET ASSETS AS OF DECEMBER 31, 2014
Cash $ 50
Accountsreceivables 200
Property, plant, equipment (net ) 2,600
Goodwill 200
Less: notespayables ( 2,700)
Netassests 350
The purpose of the Carlos Division is to develop anuclear-powered aircraft. If successful, traveling delaysassociated with refueling could be substantially reduced. Manyother benefits would also occur. To date, management has not hadmuch success and is deciding whether a write-down at this time isappropriate. Management estimated its future net cash flows fromthe project to be $400 million. Management has also received anoffer to purchase the division for $335 million. All identifiableassets’ and liabilities’ book and fair value amounts are thesame.
Instructions
(a) Prepare the journal entry (if any) to record the impairmentat December 31, 2014.
(b) At December 31, 2015, it is estimated that the division’sfair value increased to $345 million.Prepare the journal entry (ifany) to record this increase in fair value.
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