Essay
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:
Assume that the undiscounted sum of future cash flows is $18.2 million, instead of $16.5 million. Determine the amount, if any, of the impairment loss that El Dorado must recognize on these assets.
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