On December 31, 2015, a franchise that is owned by Southgate Inc., an ASPE company, has a remaining life of 27 years and a carrying amount of $1,000,000. Management estimates the following information about the franchise:

fair value	$960,000
disposal costs	$49,000
discounted cash flows (value in use)	$700,000
undiscounted future cash flows	$900,000

Please make sure your final answer(s) are accurate to 2 decimal places.

a) Determine if the franchise was impaired at the end of 2015 and prepare the journal entry, if any. Enter an appropriate description, and enter the date in the format dd/mmm (ie. 15/Jan).

b) Assume now that the undiscounted cash flows were $1,100,000. Determine if the franchise was impaired at the end of 2015 and prepare the journal entry, if any. Enter an appropriate description, and enter the date in the format dd/mmm (ie. 15/Jan).

c) Assume now that the franchise was estimated to have an indefinite life and last into perpetuity. Determine if the franchise was impaired at the end of 2015 and prepare the journal entry, if any. Enter an appropriate description, and enter the date in the format dd/mmm (ie. 15/Jan).

Please explain the workings of each entry thoroughly with calculations shown on the notes. 

Answer rating: 100% (QA)

a Franchise is impaired at the end of 2015 Journal entry Date General Journal Debit Credit 31Dec Imp... View the full answer