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Midwest Services, Inc., operates several restaurant chains throughout the Midwest. One restaurant chain has experienced sharply declining profits. The company’s management has decided to test the operational assets of the restaurants for possible impairment. The relevant information for these assets is presented below.
Book value $8.6 million
Estimated total future cash flows 7.1 million
Fair value 5.9 million
1. Determine the amount of the impairment loss, if any.
2. Repeat requirement 1 assuming that the estimated total future cash flows are $10 million and the fair value is $8.2 million.
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