CHAPTER 20: Impairment of Assets

Problem 1
FURY Company has an equipment with carrying mount of P1,600,000 on December 31, 2018
after recording depreciation for 2018. The following information is available on December
31,2018 relative to the equipment:
Fair value of similar equipment 1,400,000
Discounted future cash flows 1,300,000
Undiscounted future cash flows 1,350,000

At what amount should the equipment be reported on December 31, 2018?

a. 1,600,000
b. 1,400,000
c. 1,300,000
d. 1,350,000

What amount of impairment loss should be recognized?

a. 200,000
b. 100,000
c. 150,000
d. 0

Problem 2

VISION Company acquired equipment on January 1, 2018 for P5,000,000. The equipment hand
10 year useful life and no residual value. On December 31, 2018, the following information ws
obtained:

Expected value of undiscounted cash flows 3,600,000

Fair value estimated with in-use premise 3,700,000
Fair value estimated with in-exchange premise 3,500,000

What amount should be recognized as impairment loss for 2017?

a. 300,000
b. 400,000
c. 500,000
d. 0
Problem 3

POTTS Company had an equipment with carrying amount of P4,500,000 at year-end:

Expected discounted net cash flows 4,000,000

Fair value of similar asset 4,150,000
Fair value of the asset when sold stand-alone 4,280,000

What is the impairment loss for the current year?

a. 500,000
b. 350,000
c. 220,000
d. 0