Chapter 19 Problem 19-25
1. Carrying amount 16,000,000
Value in use 11,000,000
Impairment loss 5,000,000
2. Allocation of impairment loss
Building (8/16 x 5,000,000) 2,500,000
Equipment (4/16 x 5,000,000) 1,250,000
Inventory (4/16 x 5,000,000) 1,250,000
5,000,000
Observe that after allocating the P2,500,000 loss to the building, the carrying amount of the building would be P5,500,000 which is lower than its fair value of P6,500,000.
Accordingly, only P1,500,000 loss is allocated to the building and the balance of P1,000,000 is reallocated to the equipment and inventory prorata.
Building Equipment Inventory
Allocated loss 2,500,000 1,250,000 1,250,000
Reallocated loss (1,000,000)
(4/8 x 1,000,000) 500,000
(4/8 x 1,000,000) _________ _________ 500,000
Impairment loss 1,500,000 1,750,000 1,750,000
3. Impairment loss 5,000,000
Accumulated depreciation – building 1,500,000
Accumulated depreciation – equipment 1,750,000
Inventory 1,750,000
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