Question : 121. The balance sheet of Hidden Valley Farms reports total : 1255960

 

 

121. The balance sheet of Hidden Valley Farms reports total assets of $450,000 and $550,000 at the beginning and end of the year, respectively. The return on assets for the year is 10%. What is Hidden Valley’s net income for the year?

a.

$5,000,000.

b.

$55,000.

c.

$5,500,000.

d.

$50,000.

 

 

122. Recognition of impairment for long-term assets is required if book value exceeds:

a.Original cost.

b.Fair value.

c.Future cash flows.

d.Accumulated depreciation.

 

123. The amount of impairment loss is the excess of book value over:

a.Carrying value.

b.Future cash flows.

c.Fair value.

d.Future revenues.

 

 

124. Accounting for impairment losses:

a.Involves a two-step process to first test for impairment and then record the loss.

b.Applies only to depreciable, operational assets.

c.Applies only to assets with finite lives.

d.All of the other answers are correct.

 

 

 

 

126. Wilson Inc. owns equipment for which it originally paid $70 million and has recorded accumulated depreciation on the equipment of $12 million. Due to adverse economic conditions, Wilson’s management determined that it should assess whether an impairment should be recognized for the equipment. The estimated future cash flows to be provided by the equipment total $60 million, and its fair value at that point totals $50 million. Under these circumstances, Wilson:

a.Would record no impairment loss on the equipment.

b.Would record an $8 million impairment loss on the equipment.

c.Would record a $20 million impairment loss on the equipment.

d.Would record a $2 million impairment loss on the equipment.

 

 

127. Leonard’s Jewelry owns a patent with a carrying value of $50 million. Due to adverse economic conditions, Leonard’s management determined that it should assess whether an impairment should be recognized for the patent. The estimated future cash flows to be provided by the patent total $43 million, and its fair value at that point totals $35 million. Under these circumstances, Leonard:

a.Would record no impairment loss on the patent.

b.Would record a $7 million impairment loss on the patent.

c.Would record a $15 million impairment loss on the patent.

d.Would record a $31 million impairment loss on the patent.

 

 

128. C-Stop reports the following information at year-end:

 

 

 

Book Value

Estimated

Cash Flows

 

Fair Value

Building

$500,000

$380,000

$360,000

Patent

$35,000

$40,000

$38,000

Copyright

$40,000

$38,000

$39,000

Machine

$100,000

$120,000

$85,000

 

Based on the above information, what is the total amount of impairment loss that C-Stop should record at year end?

a.

$141,000.

b.

$126,000.

c.

$123,000.

d.

$122,000.

 

 

129. Maple Inc. has the following information regarding its assets:

 

Book Value

Estimated

Cash Flows

Fair Value

Equipment

$35,000

$30,000

$28,000

Building

$68,000

$70,000

$65,000

Patent

$30,000

$34,000

$32,000

What amount of loss should be recorded due to asset impairments?

a.

$10,000.

b.

$9,000.

c.

$8,000.

d.

$7,000.