Genuime Company

Required 1 Debit Credit

Impairment loss 900,000
Accumulated depreciation 900,000

Cost 4,500,000
Accumulated depreciation 2,100,000
Carrying amount - January 1 2,400,000
Recoverable amount 1,500,000
Impairment loss 900,000

Required 2
Depreciation (1,500,000/3) 500,000
Accumulated depreciation 500,000

Required 3
Cost 4,500,000
Accumulated depreciation (2,100,000+900,000+500,000) 3,500,000
Carrying amount - December 31 1,000,000
Wine Company

Required 1
Debit Credit
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
Carrying amount-January 1 2,000,000
Recoverable amount 875,000
Impairment loss 1,125,000

Required 2
Depreciation 375,000
Accumulated depreciation (875,000-125,000/2) 375,000

Required 3
Cost 2,500,000
Accumulated depreciation (500,000+ 1,125,000+375,000) 2,000,000
Carrying amount - December 31 500,000
Brandy Company

Required 1 Net Cash inflows PV Factor Present Value

2020 18,000,000 0.93 16,740,000

2021 15,000,000 0.857 12,855,000
2022 15,000,000 0.794 11,910,000
2023 12,000,000 0.735 8,820,000
60,000,000
Total Value In use 50,325,000

Required 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.

Required 3 Debit Credit

Impairment loss 14,675,000
Accumulated depreciation (65,000,000-50,325,000) 14,675,000

Required 4
Depreciation 12,581,250
Accumulated depreciation (50,325,000/4) 12,581,250
Cognac Company

Required Debit Credit

2020
Depreciation 1,000,000
Accumulated depreciation (10,000,000/10) 1,000,000

Depreciation 1,000,000
Accumulated depreciation 1,000,000

Impairment loss 2,000,000

Accumulated depreciation 2,000,000

2021
Depreciation 750,000
Accumulated depreciation (6,000,000/8) 750,000

Accumulated depreciation 1,750,000

Gain on reversal of impairment 1,750,000

Cost-1/1/2019 10,000,000
Accumulated depreciation (10,000,000/10 x 2) 2,000,000
Carrying amount 12/31/2020 8,000,000
Impairment loss-2020 2,000,000
Adjusted carrying amount 12/31/2020 6,000,000
Depreciation - 2021 (6,000,000/8) 750,000
Carrying amount- 12/31/2021 5,250,000

Cost-1/1/2010 10,000,000
Accumulated depreciation (10,000,000/10 x 3) 3,000,000
Carrying amount- 12/31/2020 (assuming no impairment) 7,000,000
Recorded carrying amount 5,250,000
Gain on reversal of impairment 1,750,000
Zany Company

Required

1 Value in use (1,500,000 x 5.65) 8,475,000

2 Buildings 25,000,000
Accumulated depreciation (22,500,000/20 x 6) 6,750,000
Carrying amount-1/1/2018 18,250,000
Fair value-higher than value in use 10,000,000
Impairment loss 8,250,000

3 Depreciation (10,000,000/10) 1,000,000

Jazz Company

Required 1
Total carrying amount 5,000,000
Value in use 3,600,000
Impairment loss 1,400,000

Required 2
Impairment loss allocated to goodwill 500,000
Impairment loss allocated to the other assets 900,000
1,400,000

When an impairment loss is recognized for a cash generating unit, the loss is allocated to the assets
of the unit in the following order.
a. First, to the goodwill, if any.
b. Then, to all other assets of the unit prorata based on their carrying amount.

Carrying
Amoung 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

Required3
Impairment loss 1,400,000
Goodwill 500,000
Accumulated depreciation-building 400,000
Inventory 300,000
Trademark 200,000
ated to the assets
Palpable Company

Required 1
Carrying amount 16,000,000
Value in use 11,000,000
Impairment loss 5,000,000

Required 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

Required3
Impairment loss 5,000,000
Accumulated depreciation - building 1,500,000
Accumulated depreciation - equipment 1,750,000
Inventory 1,750,000
Luzon Company

Required1
Carrying amount of CGU 115,000,000
Value in use 100,000,000
Impairment loss -15,000,000

Required2
Impairment loss 15,000,000
Goodwill 5,000,000
Accounts receivable 2,000,000
Inventory 3,000,000
Accumulated depreciation 5,000,000

The remaining impairment loss of P10,000,000, after deducting the loss applicable to goodwill,
is allocated to the other noncash assets on a prorata basis.
to goodwill,
Visayas Company

Required1
Carrying amount of CGU 10,000,000
Value in use 7,200,000
Impairment loss 2,800,000

Required2
Impairment loss 2,800,000
Goodwill 1,000,000
Accumulated depreciation - machinery (5/9 x 1,800,000) 1,000,000
Accounts receivable (3/9 x 1,800,000) 600,000
Patent (1/9 x 1,800,000) 200,000
Severe Company

Required1
Cash 4,000,000
Accounts receivable-net 5,000,000
Inventory 7,000,000
Property, plant and equipment-net 18,000,000
Goodwill 3,000,000
Carrying amount of CGU 37,000,000

Required2
Impairment loss 7,000,000

Required3
Impairment loss 7,000,000
Goodwill 3,000,000
Inventory (7/25 x 4,000,000) 1,120,000
Property, plant and equipment (18/25 x 4,000,000) 2,880,000

No impairment loss is allocated to the accounts receivable because the accounts are considered collectible
except those doubtful.
considered collectible
Burglar Company

Required
Inventory 200,000
Accounts receivable 300,000
Plant and equipment-net 3,400,000
Patent 850,000
Goodwill 100,000
Carrying amount of CGU 4,850,000
Value in use 4,050,000
Impairment loss 800,000

Impairment loss 800,000

Goodwill 100,000
Plant and equipment 600,000
Patent 100,000

Plant Patent
Allocated loss:
(3,400/4,250 x 700,000) 560,000
(850/4,250 x 700,000) 140,000
Reallocated loss 40,000 -40,000
600,000 100,000

The patent shall not be reduced to an amount below its fair value less cost of disposal of P750,000.
No impairment is allocated to accounts receivable and inventory because the accounts are considered
collectible and the inventory's fair value less cost of disposal is equal to the carrying amount.
Unison Company

Required
Cash 600,000
Inventory 1,400,000
Land 2,500,000
Plant and equipment-net 7,500,000
Goodwill 1,000,000
Carrying amount of CGU 13,000,000
Value in use 8,500,000
Impairment loss 4,500,000

Impairment loss 4,500,000

Goodwill 1,000,000
Land (25/100 x 3,500,000) 875,000
Accumulated depreciation (75/100 x 3,500,000) 2,625,000