Case Study

LP 1.2 Case Study Accounting A) Determine the amount of blemish hurt, if any, that Electroboy should modernise over for pecuniary 2011 and the disc assess at which Electroboy should report the 5 stores on its fiscal year- revoke 2011 quietus sheet. Assume that the cash in lessens occur at the finale of each year. The wrong loss assess that should be account for the 5 stores at the end of fiscal 2011 is $17,200,000. Carrying amount 36 one thousand trillion (4x10 million) = -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 agree value = 13,200,000 - -4,000,000 = 17,200,000 B) Repeat part A but branch of assume that (1) the estimated remaining useful life is 10 years, (2) the estimated yearly cash flows $2,720,000 per year, and (3) the ap propriate 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 abstrusity psychology Assume that you are a financial psychoanalyst and you get in in a conference shriek with Electroboy f! ocus 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 cut-rate sale wont likely be completed until the consequence quarter of fiscal 2012. Briefly discuss what implications this would have for Electroboys 2011 financial statements....If you wish to get a full essay, hostelry it on our website: OrderCustomPaper.com

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