1. Goodwill Impairment Presented below is net asset information related to the Mischa Division of Santana, Inc. The purpose of the Mischa division is to develop a nuclear-powered aircraft. If successful, traveling delays associated with refueling could be substantially reduced. Many other benefits would also occur. To date, management has not had much success and is deciding whether a write-down at this time is appropriate. Management estimated its future net cash flows from the project to be $400 million. Management has also received an offer to purchase the division for $335 million. All identifiable assets' and liabilities' book and fair value amounts are the same.
(a) Prepare the journal entry (if any) to record the impairment at December 31, 2010.
(b) At December 31, 2011, it is estimated that the division's fair value increased to $345 million. Prepare the journal entry (if any) to record this increase in fair value.