Home Computer FASB
Home Computer, Inc.
Home Computer, Inc. (“Home Computer”) is a publicly held manufacturer and retailer of computer equipment. The company operates five manufacturing facilities and 221 retail stores in 32 states. Home Computer operates in three business segments: (1) computer manufacturing, (2) printer manufacturing, and (3) retail store distribution.
In January 2002, Home Computer announced a plan to restructure its operations (the “Plan”). The Plan was approved by the Board of Directors at a special meeting on February 3, 2002. The details of the Plan are as follows:
Video Monitor Operations
Home Computer manufactures several computer component parts at its Seattle, Washington, manufacturing plant. Home Computer will discontinue its video monitor operations at the Seattle plant after the establishment of a replacement facility in Sacramento, California. Other component parts will continue to be manufactured at the Seattle facility. The company will scrap the equipment and “special interior building configuration assets” related to the video monitor operations since these assets do not have any continued use. Management estimates that bringing the replacement facility online will take 10 months.
• Management has determined that the video monitor operations (consisting of the equipment and the “special interior building configuration assets”) constitute the lowest level for which identifiable cash flows are, for the most part, independent of the cash flows of other assets and liabilities.
• The company estimates future cash flows from the video monitor operations will be $3.5 million during the 10-month phase-out period. The present value of these cash flows, discounted at a rate commensurate with the risk involved, is $3.2 million, which represents management’s estimate of the fair value of the equipment and special interior building configuration assets.
• The current net book value of the equipment and the “special interior building
Home Computer, Inc. (“Home Computer”) is a publicly held manufacturer and retailer of computer equipment. The company operates five manufacturing facilities and 221 retail stores in 32 states. Home Computer operates in three business segments: (1) computer manufacturing, (2) printer manufacturing, and (3) retail store distribution.
In January 2002, Home Computer announced a plan to restructure its operations (the “Plan”). The Plan was approved by the Board of Directors at a special meeting on February 3, 2002. The details of the Plan are as follows:
Video Monitor Operations
Home Computer manufactures several computer component parts at its Seattle, Washington, manufacturing plant. Home Computer will discontinue its video monitor operations at the Seattle plant after the establishment of a replacement facility in Sacramento, California. Other component parts will continue to be manufactured at the Seattle facility. The company will scrap the equipment and “special interior building configuration assets” related to the video monitor operations since these assets do not have any continued use. Management estimates that bringing the replacement facility online will take 10 months.
• Management has determined that the video monitor operations (consisting of the equipment and the “special interior building configuration assets”) constitute the lowest level for which identifiable cash flows are, for the most part, independent of the cash flows of other assets and liabilities.
• The company estimates future cash flows from the video monitor operations will be $3.5 million during the 10-month phase-out period. The present value of these cash flows, discounted at a rate commensurate with the risk involved, is $3.2 million, which represents management’s estimate of the fair value of the equipment and special interior building configuration assets.
• The current net book value of the equipment and the “special interior building