Reference no: EM132717716

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 to 3 are based on the following : On January 1, 2019, Washington Company purchased equipment with a cost of P22,000,000, useful life of 10 years and no residual value. The entity used straight line depreciation. At every-year end, the entity determined that impairment indicators are present. There is no change in the useful life or residual value. The following information is available for impairment testing at each year end: Dec 31, 2019 FVLCOD 16,200,000; VIU 17,100,000 ; Dec 31, 2020 FVLCOD 16,800,000; VIU 16,400,000

1. What is the impairment loss for 2019?

2. What is the gain on reversal of impairment for 2020?

3. What is the depreciation for 2021?

Items 4 to 7 are based on the following : On January 1, 2019, Pesci Company purchased an equipment at a cost of P3,760,000 with useful life of 4 years. On December 31, 2016 and December 31, 2020, the entity determined that impairment indicators were present. The entity provided the following information for impairment testing at year end: Dec 31, 2019 FVLCOD 2,900,000; VIU 3,000,000: Dec 31, 2020 FVLCOD 1,680,000; VIU 1,780,000. No change was made in the remaining useful life.

4. What is the depreciation for 2019?

5. What is the impairment loss for 2019?

6. What is the impairment loss for 2020?

7. What is the depreciation for 2021?

8. Palance Company provided the following calculation about an impairment loss recognized on December 31, 2019: CA of Goodwill 6,000,000; CA of Other assets 18,000,000; Impairment loss on Goodwill 6,000,000; Impairment loss on other assets 4,000,000. There has been a favorable change in the estimate of the recoverable amount of the net assets since the impairment loss was recognized. The recoverable amount is now P16,000,000 on December 31, 2020. The carrying amount of the new assets of would have been P14,400,000 on December 31, 2020. Assets are depreciated at 20% of reducing balance. What amount should be recognized as gain on reversal of impairment for 2020?

Items 9 and 10 are based on the following : Hackman Company operates a production line which is treated as a cash generating unit. At year-end, the carrying amounts of the noncurrent assets of this cash generating unit are: Intangible - goodwill 2,200,000; Tangible - plant and machinery 4,400,000. At year-end, the recoverable amount of the production line is estimated at P5,400,000.

9. What is the carrying amount of intangible asset after impairment?

10. What is the carrying amount of the tangible asset after impairment?

11. Lee Jones Company had an equipment with a carrying amount of P900,000 at year-end. The following information was available at year-end: Expected undiscounted net cash flows 840,000; Expected discounted net cash flows 800,000; Fair value, using similar asset 830,000; Fair value, assuming the asset is sold stand-alone ? The company credited Accumulated depreciation for 44,000 when it recorded impairment at year-end. What is the fair value of the asset sold stand-alone?

12. Landau Company purchased equipment for P5,600,000 on December 31, 2015. The equipment had an 8-year useful life and residual value of P800,000. The entity questioned the recoverability of the carrying amount of the equipment. On August 31, 2019 the undiscounted expected net future cash inflows related to the continued use and eventual disposal of the equipment total P3,300,000. The fair value less cost of disposal of the equipment on such date is P3,000,000. After any loss on impairment has been recognized, what is the carrying amount of the equipment?

13. Landau Company purchased equipment for P5,600,000 on December 31, 2015. The equipment had an 8-year useful life and residual value of P800,000. The entity questioned the recoverability of the carrying amount of the equipment. On August 31, 2019 the undiscounted expected net future cash inflows related to the continued use and eventual disposal of the equipment total P3,300,000. The fair value less cost of disposal of the equipment on such date is P3,000,000. After any loss on impairment has been recognized, what is the carrying amount of the equipment?

Items 14 and 15 are based on the following : Gooding Company provided the following data pertaining to a revalued machinery on January 1, 2019. Cost of Machinery 15,000,000; Replacement cost 18,000,000; 6-year life, 3 years expired. On January 1, 2020, an impairment is detected and the recoverable amount on this date of the machinery is determined to be P2,400,000.

14. What is the revaluation surplus on December 31, 2019?

15. What is the impairment loss to be recognized for 2020?