On January 1, 2020, due to the unexpected advances in technology, Claro Co. realized that its machinery has been impaired. The unit was purchased on January 1, 2016 for P20,000,000. The entity initially estimated that the asset has a useful life of 20 years with no residual value. On that date, the fair value of the asset was P10,000,000. The cash inflows and outflows to be derived from the asset from its continuing use are as follows: End of year Cash inflow Cash outflow 2020 7,500,000 3,500,000 2021 6,000,000 3,000,000 2022 4,000,000 2,000,000 2023 3,000,000 1,500,000 2024 2,500,000 1,000,000 Should the entity decide to continue to use the asset, remaining life will be 5 years. The discount rate used by the entity is 10%. How much is the impairment loss to be recognized on January 1, 2020?
On January 1, 2020, due to the unexpected advances in technology, Claro Co. realized that its machinery has been impaired. The unit was purchased on January 1, 2016 for P20,000,000. The entity initially estimated that the asset has a useful life of 20 years with no residual value.
On that date, the fair value of the asset was P10,000,000. The cash inflows and outflows to be derived from the asset from its continuing use are as follows:
|
End of year |
|
|
|
2020 |
7,500,000 |
3,500,000 |
|
2021 |
6,000,000 |
3,000,000 |
|
2022 |
4,000,000 |
2,000,000 |
|
2023 |
3,000,000 |
1,500,000 |
|
2024 |
2,500,000 |
1,000,000 |
Should the entity decide to continue to use the asset, remaining life will be 5 years. The discount rate used by the entity is 10%. How much is the impairment loss to be recognized on January 1, 2020?
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