Fellalova Corporation has recently abandoned an industrial site near the heart of a major city. The...

 

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Fellalova Corporation has recently abandoned an industrial site near the heart of a major city. The site consists of land and two adjoined buildings. The buildings have been emptied of all equipment. Following the abandonment, the company obtained a professional assessment of the value of the site. At the date of abandonment, the land is shown on Fellalova's balance sheet at its historical cost of $2,000,000. The buildings originally cost $3 million to construct, but their amortized carrying value now is $1.7 million. A professional valuation has determined that the fair value of the land is now only $200,000 in its current condition. However, the law requires Fellalova to clean the land of toxins prior to its sale or the sale of the building. Cleaning the land will cost an estimated $1,500,000. Once the land is cleaned, the fair value of the land will be $2,300,000 and the building will have a fair value of $800,000. It will take approximately eight months to clean the land. The estimated cost to sell the land and building (after cleaning the land) is $180,000 plus 5% of the sales price. Required: a. Prepare an adjusting journal entry to record the impairment. b. What information pertaining to this abandoned site should Fellalova report in its financial statements and notes? Fellalova Corporation has recently abandoned an industrial site near the heart of a major city. The site consists of land and two adjoined buildings. The buildings have been emptied of all equipment. Following the abandonment, the company obtained a professional assessment of the value of the site. At the date of abandonment, the land is shown on Fellalova's balance sheet at its historical cost of $2,000,000. The buildings originally cost $3 million to construct, but their amortized carrying value now is $1.7 million. A professional valuation has determined that the fair value of the land is now only $200,000 in its current condition. However, the law requires Fellalova to clean the land of toxins prior to its sale or the sale of the building. Cleaning the land will cost an estimated $1,500,000. Once the land is cleaned, the fair value of the land will be $2,300,000 and the building will have a fair value of $800,000. It will take approximately eight months to clean the land. The estimated cost to sell the land and building (after cleaning the land) is $180,000 plus 5% of the sales price. Required: a. Prepare an adjusting journal entry to record the impairment. b. What information pertaining to this abandoned site should Fellalova report in its financial statements and notes?