IMPAIRMENT PROBLEM #9 JJ Company determined that due to obsolescence, an equipment with an original cost of P4,500,000 and accumulated depreciation on January 1, 2019 of P2,100,000 had suffered a permanent impairment and as a result should have a recoverable amount of only P1,500,000 as of the beginning of the year. In addition, the remaining useful life of the equipment was reduced form 8 to 3 years. REQUIRED: 1. Prepare journal entry to record the impairment on January 1, 2019. 2. Prepare journal entry to record the depreciation for 2019. 3. Determine the carrying amount of the equipment on December 31, 2019. PROBLEM #10 KK Company has one division that performs machinery operations on parts that are sold to contractors. A group of machines had an aggregate cost and accumulated depreciation on January 1, 2019 as follows: Machinery 90,000,000 Accumulated depreciation 25,000,000 The machines have an average remaining useful life of 4 years and it has been determined that this group of machines constitutes a cash generating unit. The fair value less cost of disposal of this group of machines in an active market is determined to be P48,000,000. Based on supportable and reasonable assumptions, the financial forecast for this group of machines reveals the following cash inflows and cash outflows for the next four years: Cash Cash inflows outflows 2019 30,000,000 12,000,000 2020 32,500,000 17,500,000 2021 27,500,000 12,500,000 2022 16,000,000 4,000,000 It is believed that a discount rate of 8% is reflective of time value of money. The table of present value shows that the present value of 1 at 8% is as follows: Period Present value of 1 1 0.930 2 0.857 3 0.794 0.735 REQUIRED: 1. Determine the value in use. 2. Determine the recoverable amount. 3. Prepare journal entry to record the impairment loss, if any. 4. Prepare journal entry to record the depreciation for the current year. PROBLEM #11 LL Company reported an impairment loss of P2,000,000 in the income statement for the year ended December 31, 2019. This loss was related to long-lived assets acquired on January 1, 2018 with cost of P10,000,000, useful life of 10 years and no residual value. On December 31, 2019, the entity reported the long-lived assets at P6,000,000 which is the fair value less cost of disposal on such date. On December 31, 2020, the entity determined that the fair value less cost of disposal of the impaired long-lived assets had increased to P7,500,000. The straight line depreciation is recorded for the impaired assets. REQUIRED: Prepare journal entry to record the following: 1. Depreciation for 2018 2. Depreciation for 2019 3. Impairment loss for the year ended December 31, 2019 4. Depreciation for 2020 5. Gain on reversal of impairment in 2020 PROBLEM #12 MM Company has four cash generating units. One CGU has been experiencing significant losses in prior years. Thus, it becomes necessary to determine an impairment for the cash generating unit. The assets of the CGU at carrying amount at the current year-end are: Cash 10,000,000 Accounts receivable 20,000,000 Inventory 30,000,000 Property, plant, and equipment, net 50,000,000 Goodwill 5,000,000 It is reliably determined that the value in use of the CGU at the current year-end is P100,000,000. REQUIRED: 1. Determine the impairment loss of the CGU. 2. Prepare journal entry to record the impairment loss. IMPAIRMENT PROBLEM #9 JJ Company determined that due to obsolescence, an equipment with an original cost of P4,500,000 and accumulated depreciation on January 1, 2019 of P2,100,000 had suffered a permanent impairment and as a result should have a recoverable amount of only P1,500,000 as of the beginning of the year. In addition, the remaining useful life of the equipment was reduced form 8 to 3 years. REQUIRED: 1. Prepare journal entry to record the impairment on January 1, 2019. 2. Prepare journal entry to record the depreciation for 2019. 3. Determine the carrying amount of the equipment on December 31, 2019. PROBLEM #10 KK Company has one division that performs machinery operations on parts that are sold to contractors. A group of machines had an aggregate cost and accumulated depreciation on January 1, 2019 as follows: Machinery 90,000,000 Accumulated depreciation 25,000,000 The machines have an average remaining useful life of 4 years and it has been determined that this group of machines constitutes a cash generating unit. The fair value less cost of disposal of this group of machines in an active market is determined to be P48,000,000. Based on supportable and reasonable assumptions, the financial forecast for this group of machines reveals the following cash inflows and cash outflows for the next four years: Cash Cash inflows outflows 2019 30,000,000 12,000,000 2020 32,500,000 17,500,000 2021 27,500,000 12,500,000 2022 16,000,000 4,000,000 It is believed that a discount rate of 8% is reflective of time value of money. The table of present value shows that the present value of 1 at 8% is as follows: Period Present value of 1 1 0.930 2 0.857 3 0.794 0.735 REQUIRED: 1. Determine the value in use. 2. Determine the recoverable amount. 3. Prepare journal entry to record the impairment loss, if any. 4. Prepare journal entry to record the depreciation for the current year. PROBLEM #11 LL Company reported an impairment loss of P2,000,000 in the income statement for the year ended December 31, 2019. This loss was related to long-lived assets acquired on January 1, 2018 with cost of P10,000,000, useful life of 10 years and no residual value. On December 31, 2019, the entity reported the long-lived assets at P6,000,000 which is the fair value less cost of disposal on such date. On December 31, 2020, the entity determined that the fair value less cost of disposal of the impaired long-lived assets had increased to P7,500,000. The straight line depreciation is recorded for the impaired assets. REQUIRED: Prepare journal entry to record the following: 1. Depreciation for 2018 2. Depreciation for 2019 3. Impairment loss for the year ended December 31, 2019 4. Depreciation for 2020 5. Gain on reversal of impairment in 2020 PROBLEM #12 MM Company has four cash generating units. One CGU has been experiencing significant losses in prior years. Thus, it becomes necessary to determine an impairment for the cash generating unit. The assets of the CGU at carrying amount at the current year-end are: Cash 10,000,000 Accounts receivable 20,000,000 Inventory 30,000,000 Property, plant, and equipment, net 50,000,000 Goodwill 5,000,000 It is reliably determined that the value in use of the CGU at the current year-end is P100,000,000. REQUIRED: 1. Determine the impairment loss of the CGU. 2. Prepare journal entry to record the impairment loss