Henne Optical Corporation reported the following information regarding long-term operating assets for its Lens Manufacturing Operations:

Recent advances in technology have rendered the company’s lens manufacturing operations nearly obsolete. Management projects the following future cash flows for its lens manufacturing operations.

Future Period                                    Cash Flow Projection

Year 1 ………………………            $ 1,200,000

Year 2 ………………………             750,000

Year 3 ………………………             400,000

Year 4 ………………………             350,000

Year 5 ………………………             300,000

Total…………………………            $ 3,000,000

Required 

a. Determine the asset group for purposes of impairment testing and justify your decision. 

b. Compute the impairment loss for the asset group identified in part (a) for the current year, if any. 

c. Prepare the journal entry to record the impairment loss, if needed.

Transcribed Image Text:

Description Factory building (used in several segments) Less: Accumulated depreciation Net book value Camying Vl Estimated Fair Value $10,000,000 4,500,000) $5,500,000 S 8900,000 Land 2000,000 S14,000,000 Lens manufacturing equipment Less: Accumulated depreciation Net book value S 2.100,000 (600,000 1,500,000 1,100,000 Lens polishing equipment Less: Accumulated depreciation Net book value $ 3,000,000 (1,200,000) $1,800,000 s 1,625,000 General factory equipment (used in several segments) Less: Accumulated depreciation Net book value $ 6,500,000 4,000,000) 2,500,000 S 2,400,000 Delivery trucks (used in several segments) Less: Accumulated depreciation Net book value $ 1,750,000 300,000) 1.450,000 $ 1.125,000 Total net fixed assets $19.750.000