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  • Impairment of non-financial assets calculation examples

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    miko borras
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    The document contains several examples of impairment loss calculations for cash-generating units (CGUs). For each CGU, non-cash assets are identified along with their carrying amounts and the CGU's value in use. An impairment loss is calculated as the difference between the carrying amount and value in use. The loss is then allocated to the non-cash assets based on their relative carrying amounts, reducing the assets' balances. Journal entries are provided to record the impairment loss.

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    Answer key

    Original Title

    AEC115

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    The document contains several examples of impairment loss calculations for cash-generating units (CGUs). For each CGU, non-cash assets are identified along with their carrying amounts and the CGU's value in use. An impairment loss is calculated as the difference between the carrying amount and value in use. The loss is then allocated to the non-cash assets based on their relative carrying amounts, reducing the assets' balances. Journal entries are provided to record the impairment loss.

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    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
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    83 views8 pages

    Impairment of non-financial assets calculation examples

    Uploaded by

    miko borras
    The document contains several examples of impairment loss calculations for cash-generating units (CGUs). For each CGU, non-cash assets are identified along with their carrying amounts and the CGU's value in use. An impairment loss is calculated as the difference between the carrying amount and value in use. The loss is then allocated to the non-cash assets based on their relative carrying amounts, reducing the assets' balances. Journal entries are provided to record the impairment loss.

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    © All Rights Reserved
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    of 8

    35-1 (40-1)

    Building 2,000,000
    Inventory 1,500,000
    Trademark 1,000,000
    Goodwill 500,000
    Carrying Amount of CGU 5,000,000
    Value in Use 3,600,000
    Impairment Loss 1,400,000
    Applicable Goodwill 500,000
    Applicable to other noncash assets 900,000

    1.) Impairment Loss 1,400,000


    2.) Building 400,000
    Inventory 300,000
    Trademark 200,000
    900,000

    3.) Journal Entry


    Impairment Loss
    Goodwill
    Accumulated Depreciation-Bldg.
    Inventory
    Trademark

    35-2 (40-2)

    Building 8,000,000
    Equipment 4,000,000
    Inventory 4,000,000
    Carrying Amount of CGU 16,000,000
    Value in Use 11,000,000
    Impairment Loss 5,000,000

    1.) Impairment Loss 5,000,000

    2.)
    Building 2,500,000
    Equipment 1,250,000
    Inventory 1,250,000
    5,000,000

    3.) Journal Entry


    Impairment Loss
    Accumulated Depreciation-Bldg.
    Accumulated Depreciation-Equip.
    Inventory

    35-3 (40-3)

    Cash 10,000,000
    Accounts Receivable 20,000,000
    Inventory 30,000,000
    PPE, net 50,000,000
    Goodwill 5,000,000
    Carrying Amount of CGU 115,000,000
    Value in Use 100,000,000
    Impairment Loss 15,000,000
    Applicable Goodwill 5,000,000
    Applicable to other noncash assets 10,000,000

    1.) Impairment Loss 15,000,000

    2.) Journal Entry


    Impairment Loss
    Goodwill
    Accounts Receivable
    Inventory
    Accumulated Depreciation

    35-4 (40-4)

    Machinery 5,000,000
    Accounts Receivable 3,000,000
    Patent 1,000,000
    Goodwill 1,000,000
    Carrying Amount of CGU 10,000,000
    Value in Use 7,200,000
    Impairment Loss 2,800,000
    Applicable Goodwill 1,000,000
    Applicable to other noncash assets 1,800,000

    1.) Impairment Loss 2,800,000

    2.) Journal Entry Impairment Loss


    Accumulated Depreciation
    Accounts Receivable
    Patent
    Goodwill

    35-5

    Cash 4,000,000
    Accounts Receivable 6,000,000
    Allowance for Doubtful Accounts (1,000,000)
    Inventory 7,000,000
    PPE 22,000,000
    Accumulated Depreciation (4,000,000)
    Goodwill 3,000,000
    Carrying Amount of CGU 37,000,000
    Value in Use 30,000,000
    Impairment Loss 7,000,000
    Applicable Goodwill 3,000,000
    Applicable to other noncash assets 4,000,000

    1.) Carrying Amount of CGU 37,000,000

    2.) Impairment Loss 7,000,000

    3.) Journal Entry


    Impairment Loss
    PPE
    Inventory
    Goodwill

    35-6 (40-6)

    Inventory 200,000
    Accounts Receivable 300,000
    PPE 6,000,000
    Accumulated Depreciation (2,600,000)
    Patent 850,000
    Goodwill 100,000
    Carrying Amount of CGU 4,850,000
    Value in Use 4,050,000
    Impairment Loss 800,000
    Applicable Goodwill 100,000
    Applicable to other noncash assets 700,000

    3.) Journal Entry


    Impairment Loss
    Goodwill
    PPE
    Patent
    35-7 (40-7)

    Cash 600,000
    Inventory 1,400,000
    Land 2,500,000
    PPE 9,000,000
    Accumulated Depreciation (1,500,000)
    Goodwill 1,000,000
    Carrying Amount of CGU 13,000,000
    Value in Use 8,500,000
    Impairment Loss 4,500,000
    Applicable Goodwill 1,000,000
    Applicable to other noncash assets 3,500,000

    3.) Journal Entry


    Impairment Loss
    Goodwill
    PPE
    Patent
    Carrying Amount Fraction Loss
    Building 2,000,000 20/45 400,000
    Inventory 1,500,000 15/45 300,000
    Trademark 1,000,000 10//45 200,000
    4,500,000 900,000

    1,400,000
    500,000
    400,000
    300,000
    200,000

    Carrying Amount Fraction Loss


    Building 8,000,000 8//16 2,500,000
    Equipment 4,000,000 4//16 1,250,000
    Inventory 4,000,000 4//16 1,250,000
    16,000,000 5,000,000

    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

    5,000,000
    1,500,000
    1,750,000
    1,750,000

    Carrying Amount Fraction Loss


    Accounts Receivable 20,000,000 20/100 2,000,000
    Inventory 30,000,000 30/100 3,000,000
    PPE, net 50,000,000 50/100 5,000,000
    100,000,000 10,000,000

    15,000,000
    5,000,000
    2,000,000
    3,000,000
    5,000,000

    Carrying Amount Fraction Loss


    Machinery 5,000,000 5//9 1,000,000
    Accounts Receivable 3,000,000 3//9 600,000
    Patent 1,000,000 1//9 200,000
    9,000,000 1,800,000

    2,800,000
    1,000,000
    600,000
    200,000
    1,000,000

    Carrying Amount Fraction Loss

    Inventory 7,000,000 7//25 1,120,000


    PPE, net 18,000,000 18//25 2,880,000
    25,000,000 4,000,000

    7,000,000
    2,880,000
    1,120,000
    3,000,000

    Carrying Amount Fraction Loss

    PPE, net 3,400,000 340/425 560,000


    Patent 850,000 85/425 140,000
    4,250,000 700,000

    PPE Patent
    Allocated Loss 560,000 140,000
    Reallocated Loss 40,000 (40,000)
    Impairment Loss 600,000 100,000

    800,000
    100,000
    600,000
    100,000

    Carrying Amount Fraction Loss

    Land 2,500,000 25/100 875,000


    PPE, net 7,500,000 75/100 2,625,000
    10,000,000 3,500,000

    4,500,000
    1,000,000
    875,000
    2,625,000

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