90.2K

Verified Solution

Link Copied!

Question 6

Presented below is net asset information related to the Carlos Division of Santana, Inc.

CARLOS DIVISION NET ASSETS AS OF DECEMBER 31, 2014 (IN MILLIONS)
Cash		$67
Accounts receivable		214
Property, plant, and equipment (net)		2,603
Goodwill		216
Less: Notes payable		(2,645	)
Net assets		$455

The purpose of the Carlos 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 $439 million. Management has also received an offer to purchase the division for $346 million. All identifiable assets and liabilities book and fair value amounts are the same.

(b)

At December 31, 2015, it is estimated that the divisions fair value increased to $357 million. Prepare the journal entry (if any) to record this increase in fair value. (If no entry is required, select "No entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Answer & Explanation Solved by verified expert

See Answer