A company has a Cash Generating Unit (CGU) that had indicators of impairment for the year. Thefollowing information was provided on the assets:Carrying value at December 31, 2020$1,700,000Residual ValueFair Value$1,900,000$6,120,000LandBuildingEquipment$ 800,000$ 300,0006,200,0001,600,0001,520,000Goodwill4,000,00013,500,000The remaining useful life of the building as at December 31, 2020 is 20 years. The selling costs are 6% ofthe fair value for building and land. The selling cost for the equipment would be 8% of the fair value.The projected cash flows of the CGU is as follows:Year 1$580,000Year 2580,000Year 3580,000580,000Year 4Year 5620,000Assume that cash flows beyond year 5 will be the same amount.Required:Calculate the total impairment loss for the year ended December 31, 2020 and record the requiredjournal entry. Assume a discount rate of 6%.

impairment loss is the amount by which the carrying amount of an asset or a cash generating unit…

Answered: 1,600,000 4,000,000 13,500,000

Business

Accounting

1,600,000 4,000,000 13,500,000

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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