UCD 12 Purchase Price Amortization Accounting Questions

here is one of the questions

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

Metlock Division
Net Assets
As of December 31, 2020
(in millions)


Accounts receivable


Property, plant, and equipment (net)




Less: Notes payable



Net assets $466

The purpose of the Metlock 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 $425 million. Management has also received an offer to purchase the division for $335 million (deemed an appropriate fair value). All identifiable assets’ and liabilities’ book and fair value amounts are the same.

Prepare the journal entry to record the impairment at December 31, 2020.

At December 31, 2021, it is estimated that the division’s fair value increased to $346 million. Prepare the journal entry to record this increase in fair value.

Calculate Price

Price (USD)