Reference no: EM133049765
Problem 1 - Burden Company has two cash generating units. On December 31, 2012, the assets of one cash generating unit at carrying amount are:
Inventory 200,000
Accounts receivable 300,000
Plant and equipment 6,000,000
Accumulated depreciation 2,600,000
Patent 850,000
Goodwill 200,000
The accounts receivable are regarded as collectible and the inventory's fair value less cost to sell is equal to the carrying amount. The patent has a fair value less cost to sell of P750,000. On December 31, 2012, the entity determined the value in use of the unit at P4,050,000.
What is the entry to record the impairment loss?
Problem 2 - Lancer Company inaugurated a promotional campaign on January 2, 2011 to promote the salability of their product. Lancer Company placed a coupon redeemable for a premium in each package of cereal sold at P200.
Each premium costs P25 and 10 coupons must be presented by a customer to receive a premium. Lancer estimated that only 70% of the coupons issued would be redeemed. For the 6 months ended July 31, 2011, the following transactions occurred:
Packages of cereal sold 120,000
Premium purchased 30,000
Coupons redeemed 54,000
1. How much should be reported as premium expense for coupons on the fiscal year ended July 31, 2011?
2. How much is the estimated liability for coupons on the fiscal year ended July 31, 2011?
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