During 2013, a company paid $1,200,000 to acquire a roller coaster. The estimated useful life of the roller coaster was estimated at ten years and its residual value was expected to be $200,000. As of December 31, 2018, Accumulated Depreciation in the amount of $500,000 had been recorded on the roller coaster. Management estimates that other amusement parks and scrap dealers would currently pay $600,000 for the roller coaster.Required:Part a. Determine the asset impairment loss, if any, on the roller coaster at December 31, 2018.Part b. Prepare the journal entry to record the asset impairment loss on this roller coaster as of December 31, 2018.
What will be an ideal response?
Part a
Asset impairment loss = Book value ? Fair value
Asset impairment loss = (Cost ? Accumulated depreciation) ? Fair value
= ($1,200,000 ? $500,000) ? $600,000 = $100,000
Part b
| Accumulated Depreciation | 500,000 |
| Equipment | 500,000 |
| Loss on Impairment | 100,000 |
| Equipment | 100,000 |
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WorldCom is a telecommunications company that provides national and international service to local and long-distance customers. On September 14, 1998, WorldCom acquired MCI Communications Corporation (MCI) pursuant to a merger agreement. The acquisition can be divided into three stages:1)WorldCom created an acquisitions subsidiary (TC Investments Corporation) by transferring WorldCom stock and cash to TC Investments Corporation in exchange for newly issued TC Investments Corporation stock. TC Investments Corporation then used the WorldCom stock and cash to acquire MCI as described in the next two steps.2)TC Investments Corporation used cash to purchase all the outstanding MCI Class A common stock from British Telecommunications (BT) for $51 per share. BT had acquired the MCI Class A
common stock two years earlier in a failed merger attempt involving BT and MCI. In addition, TC Investments Corporation used WorldCom stock to acquire all outstanding shares of regular MCI common stock from other MCI shareholders. In this exchange, MCI shareholders received 1.2439 shares of WorldCom stock for each share of regular MCI common stock surrendered. TC Investments Corporation paid cash in lieu of issuing fractional WorldCom shares to MCI shareholders who were entitled to such fractional shares. More than 50% of the consideration used to acquire MCI was composed of WorldCom stock.3)After the stock acquisition, MCI transferred its assets to TC Investments Corporation in a liquidation transaction, after which TC Investments Corporation held MCI assets instead of MCI stock. TC Investments Corporation then changed its name to MCI Communications Corporation, and WorldCom changed its name to MCI WorldCom.After these three steps, MCI Communications Corporation, which held the acquired MCI assets, ended up as a subsidiary of MCI WorldCom. Total assets of MCI WorldCom after the merger were $86 billion, including the stock of its subsidiary, MCI Communications Corporation.On December 31, 1997, prior to the acquisition, MCI had $576 million of U.S. NOL carryovers and $179 million of minimum tax credit carryovers. MCI WorldCom incurred expenses of $127 million in connection with the acquisition. MCI WorldCom recorded the transaction as a purchase for financial accounting purposes with the excess of cost over FMV being recorded as a combination of goodwill, in-process R&D costs, and other intangible assets. In addition, MCI WorldCom incurred $21 million in employee severance pay outlays. MCI stock options were converted into MCI WorldCom stock options. What type of reorganization did WorldCom and MCI engage in? What tax issues should the parties to the reorganization (MCI, BT, TC Investments Corporation, WorldCom, and the MCI and WorldCom shareholders) consider when evaluating the acquisition? What will be an ideal response?
Which of the following would be a moral right of an individual?
A. The right to earn minimum wage B. The right to free speech C. The right to a workplace that is free from sexual harassment D. The right to paid holidays
Describe how a manager uses all four management resources during the process of interviewing a candidate for a job.
What will be an ideal response?
Pursuant to the power given to it by Article III of the U.S. Constitution, Congress has established the U.S. courts of appeals
Indicate whether the statement is true or false