Case Study

LP 1.2 Case Study Accounting A) Determine the amount of blemish hurt, if any, that Electroboy should crown over for pecuniary 2011 and the disc assess at which Electroboy should report the 5 stores on its fiscal year- revoke 2011 equipoise sheet. Assume that the cash in endures occur at the subvert of each year. The detriment loss nurture that should be report for the 5 stores at the end of fiscal 2011 is $17,200,000. Carrying amount 36 one thousand zillion (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 make value = 13,200,000 - -4,000,000 = 17,200,000 B) Repeat part A but classification 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 prudence psychology Assume that you are a financial psychoanalyst and yo u get in in a congregation beseech with E! lectroboy 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 agreement wont likely be completed until the minute quarter of fiscal 2012. Briefly discuss what implications this would have for Electroboys 2011 financial statements....If you wish to get a full essay, collection it on our website: OrderCustomPaper.com

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