Answered: Building 2,000,000 Inventory 1,500,000…

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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5.On Jan 1, 2021, ABC Company acquired all the assets and liabilities of another entity. The acquiree has a number of operating divisions, including one whose major industry is the manufacture of toy train. The toy train division is regarded as a cash generating unit. In paying P20,000,000 for the net assets of the acquiree, ABC Company calculated that it had acquired goodwill of P2,400,000. The goodwill was allocated to each of the divisions, and the assets and liabilities acquired are measured at fair value at acquisition date. On Dec 31, 2021, the carrying amounts of the assets of the toy train division were:

Building
2,000,000
Inventory
1,500,000
Trademark
1,000,000
Goodwill
500,000
There is a declining interest in toy train because of the aggressive marketing
of computer-based toys. Management of ABC Company measured the
value in use of the toy train division on Dec 31, 2021 at P3,600,000.
What is the impairment loss to be allocated to the building?

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