Sunset Resorts, Inc., owns and manages resort properties. On January 15, 2007, one of its properties was found to be adjacent to a toxic chemical disposal site. As a result of the negative publicity, this property's bookings dropped 40% during 2007. On December 31, 2007, the accounts of the company showed the following details regarding the impaired property:
|
Land
|
$ 25,000,000
|
|
Buildings and improvements (net)
|
80,000,000
|
|
Equipment (net)
|
15,000,000
|
|
Total
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$120,000,000
|
Management decides that closing the resort is the only option. As a result, it is estimated that the buildings and improvements will be written off completely. The land can be sold for other uses for $17 million, while the equipment can be disposed of for $4 million, net of disposal costs.
a. Journalize the entry to record the asset impairment on December 31, 2007.
b. Provide the note disclosure for the impairment.