At the beginning of 2009, Metatec inc. acquired Ellsion Technology Corp for $600 million. In addition to cash, receivables, and inventory , the following asssets and their fair values were also inquired.
plant and Equipment(Depreciable Assets) 150 million
- Patent 40 million
- goodwill 100 million
The plant and equipment are depreciated over a 10 year useful life on a straight line basis. There is no estiamted residual value. The patent is estimated to have a 5 year useful life, no residual value, and is amortized using straightline method.
At the end of 2011 a change in business climate indicated to management that the assets of Ellison might be impaired. The following amounts have been determined.
- Plant & equip.
- Undiscovered Sum of future cash flows 80 Million
- Fair Value 60 Million
- Patent:
- Undiscovered sum of future cash flows 20 Million
- Fair value 13 Million
- Goodwill:
- Fair value of Ellison Tech 450 Million
- Fair Value of Ellisons net Assets (excluding goodwill) 390 Million
Book Value of Ellison net assets ( including goodwill) 470 Million- this is after first recording any impairment losses on plant and equipment and the patent.
Required
1.Compute the book value of the plant and equipment and patent at the end of 2011.
2. When should the plant and equipment and the patent be tested for impairment
3. When should goodwill be tested for impairment
4. Determine the amount of any impairment loss to be recorded if any for the three assets.