TOPIC: IMPAIRMENT

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 A ON - 0.930 0.857 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