Chapter 19 Problem 19-16 to 20
Problem 19-16
1. Impairment loss 900,000
Accumulated depreciation 900,000
Cost 4,500,000
Accumulated depreciation 2,100,000
Book value – January 1 2,400,000
Recoverable value 1,500,000
Impairment loss 900,000
2. Depreciation (1,500,000 / 3) 500,000
Accumulated depreciation 500,000
3. Cost 4,500,000
Accumulated depreciation (2,100,000 + 900,000 + 500,000) 3,500,000
Book value – December 31 1,000,000
Problem 19-17
1. Impairment loss 1,125,000
Accumulated depreciation 1,125,000
Cost – January 1 2,500,000
Accumulated depreciation (2,500,000 – 500,000 / 8 x 2) 500,000
Book value – January 1 2,000,000
Recoverable value 875,000
Impairment loss 1,125,000
2. Depreciation 375,000
Accumulated depreciation (875,000 – 125,000 / 2) 375,000
3. Cost 2,500,000
Accumulated depreciation (500,000 + 1,125,000 + 375,000) 2,000,000
Book value – December 31 500,000
Problem 19-18
1. Offer price 25,000,000
Cost of dismantling and removal assumed by the bidder 5,000,000
Fair value less cost to sell 30,000,000
Present value of future cash flows 33,000,000
Less: Estimated liability 5,000,000
Value in use 28,000,000
Carrying amount 39,000,000
Less: Estimated liability 5,000,000
Adjusted carrying amount 34,000,000
Recoverable amount – fair value less cost to sell, being the higher amount 30,000,000
Impairment loss 4,000,000
PAS 36, paragraph 78, provides that the fair value less cost to sell is equal to the estimated selling price plus the estimated liability assumed by the buyer.
The standard further provides that to perform a meaningful comparison between the carrying amount and recoverable amount, the estimated liability assumed by the buyer is deducted in determining both the value in use and carrying amount of the asset.
2. Impairment loss 4,000,000
Accumulated depreciation 4,000,000
253 Problem 19-19
1. Net cash inflows PV factor Present value
2008 18,000,000 .930 16,740,000
2009 15,000,000 .857 12,855,000
2010 15,000,000 .794 11,910,000
2011 12,000,000 .735 8,820,000
60,000,000
Total value in use 50,325,000
2. The recoverable amount is the value in use of P50,325,000 because this is higher than the
fair value less cost to sell of P48,000,000.
3. Impairment loss 14,675,000
Accumulated depreciation (65,000,000 – 50,325,000) 14,675,000
4. Depreciation 12,581,250
Accumulated depreciation (50,325,000 / 4) 12,581,250
Problem 19-20
1. Depreciation 1,000,000
Accumulated depreciation (10,000,000 / 10) 1,000,000
2. Depreciation 1,000,000
Accumulated depreciation 1,000,000
3. Impairment loss 2,000,000
Accumulated depreciation 2,000,000
4. Depreciation 750,000
Accumulated depreciation (6,000,000 / 8) 750,000
5. Accumulated depreciation 1,750,000
Gain on impairment recovery 1,750,000
Cost – 1/1/2006 10,000,000
Accumulated depreciation (10,000,000 / 10 x 2) 2,000,000
Book value – 12/31/2007 8,000,000
Impairment loss – 2007 2,000,000
Adjusted book value – 12/31/2007 6,000,000
Depreciation – 2008 (6,000,000 / 8) 750,000
Book value – 12/31/2008 5,250,000
Cost – 1/1/2006 10,000,000
Accumulated depreciation (10,000,000 / 10 x 3) 3,000,000
Book value – 12/31/2008 (assuming no impairment) 7,000,000
Recorded book value 5,250,000
Gain on reversal of impairment 1,750,000
The fair value or recoverable value of P7,500,000 cannot exceed the “book value” that would have been determined assuming no impairment is recognized.
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