ICCT COLLEGES FOUNDATION INC.

ACCOUNTING FOR GOVERNMENT AND NON-PROFIT

ORGANIZATIONS
VILLARIEZ JR, BALTAZAR D. 20185539 MRS. ARCELI NOBLEZA
OL11E29
CHAPTER 10
ACTIVITY/ASSIGNMENT (5 pts)
At year-end, Entity A determines an indication that an equipment with a carrying amount
of ₱400,000 is impaired. This equipment was acquired 5 years earlier and was originally
estimated to have a useful life of 10 years and a 5% residual value. Entity A determines
the following information:
Fair value less costs to sell…………….₱320,000
Replacement cost……………………….₱700,000
9. Assume the indication of impairment is physical damage to the equipment. Entity A
estimates that it would cost ₱10,000 to restore the equipment’s service potential to the
level before the physical damage. How much is the impairment loss under the
Restoration Cost Approach?
a. 42,667 c. 50,000
b. 47,500 d. 42,500

Solution:
Replacement cost 700,000
Accumulated depreciation - (700K x 95% x 5/10) (332,500)
Depreciated Replacement Cost – Value in use 367,500
Depreciated replacement cost 367,500
Less: Restoration cost (10,000)
Value in use 357,500
Recoverable service amount (VIU - higher) 357,500
Carrying amount (400,000)
Impairment loss (42,500)