Reegan Company Owns a Trade Name That Was Purchased in an Acquisition

question 69

Multiple Choice

Reegan Company owns a trade name that was purchased in an acquisition of Hamilton Company. The trade name has a book value of €5,250,000, but according to GAAP, it is assessed for impairment on an annual basis. To perform this impairment test, Reegan must estimate the fair value of the trade name. It has developed the following cash flow estimates related to the trade name based on internal information. Each cash flow estimate reflects Reegan's estimate of annual cash flows over the next 7 years. The trade name is assumed to have no residual value after the 7 years. (Assume the cash flows occur at the end of each year.)

• A) €5,250,000
• B) €1,018,500
• C) €3,090,000
• D) €5,685,654

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Definitions:

Environment Knowledge

Information and understanding about one's surrounding area and the spatial relationships of locations in that environment.

Cognition

An understanding or knowledge of the structure of the psychological environment.

Place Cells

Neurons in the hippocampus that become active when an animal is in a specific location in its environment, playing a crucial role in spatial memory.

Grid Cells

Neurons found in the brains of many animals that enable them to understand their position in space.