Question
At the beginning of current year, Cebu Company acquired all the assets and liabilities of another entity. The acquiree has a number of operating divisions,
At the beginning of current year, Cebu Company acquired all the assets and liabilities of another entity. The acquiree has a number of operating divisions, including one whose major industry is the manufacture of toy train. The toy train division is regarded as a cash generating unit. In paying P20,000,000 for the net assets of the acquiree, Cebu calculated that it had acquired goodwill of P2,400,000. The goodwill was allocated to each of the divisions, and the assets and liabilities acquired are measured at fair value at acquisition date. At year-end, the carrying amounts of the assets of the toy train division were: Building 2,000,000 Inventory 1,500,000 Trademark 1,000,000 Goodwill 500,000 There is a declining interest in toy train because of the aggressive marketing of computer-based toys. The entity measured the value in use of the toy train division at year-end at P3,600,000. 6.1 What is the impairment loss on goodwill? A. 0 C. 250,000 B. 140,000 D. 500,000 6.2 What is the impairment loss to be allocated to the building? A. 300,000 C. 500,000 B. 400,000 D. 900,000
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