Reference no: EM132979462
Problem - One of the cash generating units of Severe Company is the production of liquor.
At the year-end, the entity believed that the assets of the cash generating unit are impaired based on an analysis of economic indicators.
The assets and liabilities of the cash generating unit at carrying amount at year-end are:
Cash 4,000,000
Accounts Receivable 6,000,000
Allowance for doubtful accounts 1,000,000
Inventory 7,000,000
Property, plant and equipment 22,000,000
Accumulated Depreciation 4,000,000
Goodwill 3,000,000
Accounts payable 2,000,000
Loans Payable 1,000,000
The entity determined that the value in use of the cash generating unit is P30,000,000.
The accounts receivable are considered collectible, except those considered doubtful.
Required -
1. Determine the carrying amount of the cash generating unit.
2. Determine the impairment loss, if any, of the cash generating unit.
3. Prepare journal entry to record the impairment loss.
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