UYJ$10\mathrm{.}4$ Electroboy Enterprises, Inc. operates several stores throughout the western United States. As part of an operational and financial reporting review in a response to a downturn in its markets, the company$$s management has decided to perform an impairment test on five stores $($combined$).$ The five stores$$ sales have declined due to aging facilities and competition from a rival that opened new stores in the same markets. Management has developed the following information concerning the five stores as of the end of fiscal $2024.$

Original cost

$$36$ million

Accumulated depreciation

$$10$ million

Estimated remaining useful life

$4$ years

Estimated expected future annual cash flows $($not discounted$)$

$$4\mathrm{.}0$ million per year

Appropriate discount rate

$5\%$

Accounting

Determine the amount of impairment loss, if any, that Electroboy should report for fiscal $2024$ and the book value at which Electroboy should report the five stores on its fiscal year$-$end $2024$ balance sheet. Assume that the cash flows occur at the end of each year.

Repeat part $($a$),$ but instead assume that $(1)$ the estimated remaining useful life is $10$ years, $(2)$ the estimated annual cash flows are $$2,720,000$ per year, and $(3)$ the appropriate discount rate is $6\%.$

Analysis

Assume that you are a financial analyst and you participate in a conference call with Electroboy management in early $2025($before Electroboy closes the books on fiscal $2024).$ During the conference call, you learn that management is considering selling the five stores, but the sale won$$t likely be completed until the second quarter of fiscal $2025.$ Briefly discuss what implications this would have for Electroboy$$s $2024$ financial statements. Assume the same facts as in part $($b$)$ above.

Principles

Electroboy management would like to know the accounting for the impaired asset in periods subsequent to the impairment. Can the assets be written back up$?$ Briefly discuss the conceptual arguments for this accounting.