El Dorado Foods Inc. owns a chain of specialty stores in the Pacific Northwest. Recently, four of the stores have experienced declining profits due to market saturation in the area. As a result, manag

El Dorado Foods Inc. owns a chain of specialty stores in the Pacific Northwest. Recently, four of the stores have experienced declining profits due to market saturation in the area. As a result, management gathered data about possible impairment of the assets of the stores. The information gathered was as follows:

Book value: $17.5 million

Fair value: $14.9 million

Undiscounted sum of future cash flows: $16.5 million

Required: Determine the amount, if any, of the impairment loss that El Dorado must recognize on these assets.

Answer $1 million

$1.6 million

$14.9 million

$2.6 million

Leave a Comment