Question
The questions are all about the impairment of asset in intermediate accounting subject. Kindly attached the solutions of your answers. Thank you. Items 1 and
The questions are all about the impairment of asset in intermediate accounting subject. Kindly attached the solutions of your answers. Thank you.
Items 1 and 2 are based on the following : Bardem Company has two cash generating units, CGU Inca and CGU Maya. There is no goodwill allocated to the CGU. The carrying amounts of the CGUs are : CGU Inca P30,000,000 ; CGU Maya P45,000,000. The entity has an office building that has not been included in the carrying amounts of the CGU and can be allocated to the units on the basis of the carrying amounts. The office building has a book value of P15,000,000. The entity calculated the value in use of the CGUs as follows : CGU Inca P27,000,000 ; CGU Maya P57,000,000.
1. What is the impairment loss of CGU Inca?
2. What is the impairment loss of CGU Maya?
Items 3 to 5 are based on the following : Arkin Company has determined that the furniture division is a CGU. The entity calculated the value in use of the division to be P33,000,000. The entity has also determined that the fair value less cost of disposal of the building is P19,500,000. The carrying amounts of the assets are as follows : Building P24,000,000; Equipment 12,000,000; Inventory 12,000,000
3. What is the impairment loss allocated to equipment?
4. What is the impairment loss allocated to inventory?
5. What is the total carrying amount of the depreciable assets after the impairment?
Items 6 to 8 are based on the following Food supplements production is a CGU of Waltz Company. At year end, the entity believed that the assets of the CGU are impaired based on an analysis of economic indicators. The assets and liabilities of the CGU at carrying amount at year-end are: Cash 12,000,000; Accounts receivable 18,000,000; Allowance for doubtful accounts 3,000,000; Inventory 21,000,000; Property, plant & eqpt 66,000,000; Accumulated depn 12,000,000; Goodwill 9,000,000; Accounts payable 6,000,000; Loans payable 3,500,000; Advances from customers 1,000,000. The entity determined that the value in use of the CGU is P90,000,000. The accounts receivable are considered collectible except those considered doubtful. In recording the impairment,
6. What is the amount credited to Inventory?
7. What amount is credited to Accumulated depreciation?
8. What is the carrying amount of the PPE after the impairment?
Items 9 and 10 are based on the following : At year-end, Bale Company has a CGU with the following assets at carrying amount : Inventory 600,000; Accounts receivable 900,000; Plant and equipment 18,000,000; Accumulated depn 7,800,000; Patent 2,550,000; Goodwill 300,000. The accounts receivable are regarded as collectible and the inventory has a fair value less cost of disposal which is greater than the carrying amount. The patent has FVLCOD of P2,250,000. At year end, the entity determined the value in use and FVLCOD of the CGU at P12,150,000 and P12,000,000 respectively.
9. What is the carrying amount of the plant and equipment after recording the impairment loss?
10. What is the impairment loss allocated to patent?
11. During November, Plummer Company determined as result of a plant rearrangement that there had been a significant change in the manner in which a machinery was going to be used in manufacturing process. In December, an analysis of the future cash flows related to the machinery resulted in the following information: Expected future cash inflows from use of the machinery 700,000; Expected future cash outflows from use of the machinery 150,000; Expected future cash proceeds from sale of the machinery at the disposal date 100,000. For purpose of determining whether or not the entity should recognize an impairment, what is the amount of expected future cash flows that would be used for the machinery?
12. On January 1, 2016, Leto Company purchased a machine for P1,600,000 and established an annual depreciation charge of P200,000 over an eight-year life. During 2019, after issuing the 2018 financial statements, the entity concluded that the machine suffered permanent impairment of the operational value, and P400,000 is reasonable estimate of the amount expected to be recovered through use of the machine for the period January 1, 2019 through December 31, 2023. What should be reported as carrying amount of the machine on December 31, 2019?
13. Which of the following is CORRECT?
a.An impairment loss is the amount by which the carrying amount of an asset exceeds fair value less cost of disposal
b.The fair value of an asset is the discounted value of future cash flows expected to be derived from the asset.
c.The best evidence of fair value is the quoted price in an active market for similar asset.
d.Cost of disposal does not include cost of removing the asset.
e.All of the above
f.None of the above.
14. Which of the following is CORRECT?
a.If the fair value less cost of disposal cannot be determined, the recoverable amount is the value in use.
b.If an asset is to be disposed of, the recoverable amount is the value in use or fair value less cost of disposal whichever is higher.
c.Impairment loss for productive asset shall be reported as a change in accounting estimate.
d.Long-lived assets are reviewed for impairment every year at the end of the reporting period.
e.An entity shall test an intangible asset with indefinite useful life for impairment if there is an indication of impairment.
f.All of the above
g.None of the above
15. Which of the following is INCORRECT?
a.The carrying amount of an asset is relevant in determining the value in use of an asset.
b.The impairment test compares the book value with the lower of fair value less cost of disposal and value in use.
c.A cash generating unit is a group of assets that generate cash inflows from continuing use that are largely independent of the cash flows from other group of assets.
d.The allocation of impairment loss recognized for a CGU is : first, to any goodwill, and the balance all the remaining assets prorata based on carrying amount.
e.All of the above
f.None of the above
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