Question
Please only answer if you are sure about your answer. A company has a Cash Generating Unit (CGU) that had indicators of impairment for the
Please only answer if you are sure about your answer.
A company has a Cash Generating Unit (CGU) that had indicators of impairment for the year. The following information was provided on the assets:
|
| Carrying value at December 31, 2020 | Residual Value | Fair Value |
| Land | $1,700,000 |
| $1,900,000 |
| Building | 6,200,000 | $ 800,000 | $6,120,000 |
| Equipment | 1,600,000 | $ 300,000 | 1,520,000 |
| Goodwill | 4,000,000 |
|
|
|
| 13,500,000 |
|
|
The remaining useful life of the building as at December 31, 2020 is 20 years. The selling costs are 6% of the fair value for building and land. The selling cost for the equipment would be 8% of the fair value. The projected cash flows of the CGU is as follows:
| Year 1 | $580,000 |
| Year 2 | 580,000 |
| Year 3 | 580,000 |
| Year 4 | 580,000 |
| Year 5 | 620,000 |
Assume that cash flows beyond year 5 will be the same amount.
Required:
Calculate the total impairment loss for the year ended December 31, 2020 and record the required journal entry. Assume a discount rate of 6%.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started
Financial And Managerial Accounting For Decision Makers
Authors: Michelle Hanlon, Robert Magee, Glenn Pfeiffer, Thomas Dyckman
4th Edition
1618533614, 9781618533616
