The abrasives group of Chemical Products Inc. $($CPI$)$ has been suffering a decline in its business, due to new product introductions by competitors. At $31$ December $20$X$5,$ the assets of the abrasives cash$-$generating unit are shown as follows $($in millions$)$ on the company$$s SFP:

Cost Accumulated Depreciation Net Book Value

Equipment $(10-$year life$)$ $ $1,050$ $ $540$ $ $510$

Fixtures $(10-$year life$)490130360$

Patent rights $(40-$year life$)320170150$

$ $1,860$ $ $840$ $ $1,020$

An impairment test indicates that the recoverable amount of the abrasives cash$-$generating unit$$s assets is $$720$ million. The assets are not separable$$they must be operated or sold together as a group. No individual asset has a determinable individual fair value less cost to disposal.

Required:

$1.$ Prepare an adjusting journal entry to record the impairment. $($If no entry is required for a transaction$/$event$,$ select $"$No journal entry required" in the first account field. Enter your answers in millions.$)$

$2.$ What would be the net book value of the assets after one year if no impairment was recorded? Assume that straight$-$line depreciation is used. $($Enter your answer in millions.$)$

Answer rating: 100% (QA)

1 Adjusting Journal Entry to Record the Impairment Impairment Loss 72... View the full answer