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    Cpa Review School of The Philippines Manila

    Uploaded by

    Raquel Villar Dayao
    This document contains 5 multiple choice questions regarding impairment accounting. The questions cover topics such as calculating impairment loss, reversing impairment losses, and determining impairment losses on goodwill, inventory, and property, plant and equipment at the cash generating unit level.

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    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd

    Cpa Review School of The Philippines Manila

    Uploaded by

    Raquel Villar Dayao
    57 views2 pages
    This document contains 5 multiple choice questions regarding impairment accounting. The questions cover topics such as calculating impairment loss, reversing impairment losses, and determining impairment losses on goodwill, inventory, and property, plant and equipment at the cash generating unit level.

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    6

    Original Title

    6980 - Impairment

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    This document contains 5 multiple choice questions regarding impairment accounting. The questions cover topics such as calculating impairment loss, reversing impairment losses, and determining impairment losses on goodwill, inventory, and property, plant and equipment at the cash generating unit level.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    57 views2 pages

    Cpa Review School of The Philippines Manila

    Uploaded by

    Raquel Villar Dayao
    This document contains 5 multiple choice questions regarding impairment accounting. The questions cover topics such as calculating impairment loss, reversing impairment losses, and determining impairment losses on goodwill, inventory, and property, plant and equipment at the cash generating unit level.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 2

    CPA REVIEW SCHOOL OF THE PHILIPPINES

    Manila
    FINANCIAL ACCOUNTING AND REPORTING VALIX/VALIX/ESCALA/SANTOS/DELA CRUZ

    IMPAIRMENT

    1. At year-end, an entity had an equipment with cost of P9,000,000 and accumulated depreciation of
    P3,000,000. Due to obsolescence and physical damage, the equipment was found to be impaired. On
    same date, the entity determined that the equipment had a fair value less cost of disposal of P4,500,000,
    discounted net cash inflows of P4,000,000 and undiscounted net cash inflows of P5,000,000. What
    amount should be reported as impairment loss for the current year?
    a. 1,500,000
    b. 2,000,000
    c. 1,000,000
    d. 0
    2. On January 1, 2022, an entity purchased equipment with cost of P10,000,000, useful life of 5 years and
    no residual value. The entity used straight line depreciation. On December 31, 2022 and December 31,
    2023, the entity determined that impairment indicators are present. There is no change in useful life or
    residual value.
    December 31, 2022 December 31, 2023
    Fair value loss cost of disposal 7,200,000 5,900,000
    Value in use 6,500,000 5,600,000
    1. What is the impairment loss for 2022?
    a. 800,000
    b. 750,000
    c. 600,000
    d. 0
    2. What is the gain on reversal of impairment for 2023?
    a. 200,000
    b. 500,000
    c. 600,000
    d. 0
    3. An entity reported the following calculation relating to an impairment loss of P5,000,000 suffered on
    December 31, 2022:
    Goodwill Other assets
    Carrying amount 3,000,000 9,000,000
    Impairment loss (3,000,000) (2,000,000)
    There has been a favorable change in the estimate of the recoverable amount of the assets. The recoverable
    amount is now P8,000,000 on December 31, 2023. The carrying amount of the assets would have been
    P7,200,000 on December 31, 2023 if there was no impairment loss recognized on December 31, 2022.
    Other assets are depreciated at 20% of reducing balance.
    1. What amount of gain on reversal of impairment should be recognized in 2023?
    a. 1,000,000
    b. 2,400,000
    c. 1,600,000
    d. 0
    2. What is the goodwill after recording reversal of impairment?
    a. 1,600,000
    b. 1,400,000
    c. 1,440,000
    d. 0

    6980
    Page 2

    4. An entity reported on impairment loss of P2,000,000 in 2021. This loss was related to an item of property,
    plant and equipment which was acquired on January 1, 2020 with cost of P10,000,000, useful life of 10
    years and no residual value. The straight line method is used in recording depreciation. On December 31,
    2021, the entity reported this asset at P6,000,000 which is the fair value less cost of disposal on such date.
    On December 31, 2022, the entity determined that the fair value less cost of disposal of the impaired asset
    had increased to P7,500,000.
    1. What is the carrying amount of the asset on December 31, 2022 after impairment?
    a. 6,000,000
    b. 5,250,000
    c. 5,400,000
    d. 7,000,000
    2. What amount of gain on reversal of impairment should be reported for 2022?
    a. 2,250,000
    b. 1,750,000
    c. 1,500,000
    d. 0
    5. An entity believed that the assets of the cash generating unit (CGU) are impaired. The assets and liabilities
    of the cash generating unit at carrying amount at year-end are:
    Cash 5,000,000
    Accounts receivable 6,000,000
    Allowance for doubtful accounts 1,000,000
    Inventory 7,000,000
    Property, plant and equipment 22,000,000
    Accumulated depreciation 4,000,000
    Goodwill 3,000,000
    Accounts payable 2,000,000
    Loans payable 1,000,000
    The entity determined that the value in use of the cash generating unit is P30,000,000. The accounts
    receivable are considered collectible, except those considered doubtful. The fair value less cost of
    disposal of the inventory is P6,000,000.
    1. What is the impairment loss on goodwill?
    a. 3,000,000
    b. 1,500,000
    c. 2,000,000
    d. 0
    2. What is the impairment loss on inventory?
    a. 1,400,000
    b. 1,000,000
    c. 2,500,000
    d. 0
    3. What is the impairment loss on property, plant and equipment?
    a. 4,000,000
    b. 5,000,000
    c. 3,600,000
    d. 3,200,000

    END

    6980

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