Question

At the beginning of 2009, Metatec Inc. acquired Ellison Technology Corporation for $600 million. In addition to cash, receivables, and inventory, the following assets and their fair values were also acquired:


The plant and equipment are depreciated over a 10-year useful life on a straight-line basis. There is no estimated residual value. The patent is estimated to have a 5-year useful life, no residual value, and is amortized using the straight-line method.

At the end of 2011, a change in business climate indicated to management that the assets of Ellison might be impaired. The following amounts have been determined:


*After first recording any impairment losses on plant and equipment and the patent.

Required:
1. Compute the book value of the plant and equipment and patent at the end of 2011.
2. When should the plant and equipment and the patent be tested for impairment?
3. When should goodwill be tested for impairment?
4. Determine the amount of any impairment loss to be recorded, if any, for the threeassets.


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  • CreatedJuly 02, 2013
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