On January 1, 2021, Larry Company purchased a patent for an immune system boosting drink called Infra for P800,000. The patent is determined to have an indefinite life. During 2022, a competitor introduced a new product that is in direct competition with Infra; hence, the patent was tested for possible impairment. Data gathered suggests that the patent still has an indefinite life, but the cash flows to be generated from the asset have been reduced to either P40,000 per year (with 50% probability) or to P80,000 per year (with 50% probability). The appropriate risk-free interest rate is 8% and the risk-adjusted interest rate is 10%. What is the impairment loss recognized in the accounts for the year ended December 31, 2022? P200,000 P400,000 P800,000 P0
On January 1, 2021, Larry Company purchased a patent for an immune system boosting drink called Infra for P800,000. The patent is determined to have an indefinite life.
During 2022, a competitor introduced a new product that is in direct competition with Infra; hence, the patent was tested for possible impairment. Data gathered suggests that the patent still has an indefinite life, but the
What is the impairment loss recognized in the accounts for the year ended December 31, 2022?
- P200,000
- P400,000
- P800,000
- P0
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