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

question 5

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.) Reegan determines that the appropriate discount rate for this estimation is 6%.To the nearest dollar, what is the estimated fair value of the trade name?

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

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Definitions:

Competitive Games

Activities or sports where individuals or teams compete against each other under established rules, aiming to achieve a defined victory condition.

Group Dating

Social gatherings where multiple couples go out on a date together, commonly found in early adolescence as a way to ease into dating.

Parental Monitoring

The strategies utilized by parents to oversee their children's activities, with the aim of protecting, guiding, and understanding their development and behavior.

Autonomy

The capacity to make an informed, uncoerced decision independently.