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Impairment and Recovery Analysis

On December 31, 20x5, Singkit Co. recognized an impairment loss of P10,000,000 for its manufacturing factory, which had a carrying amount of P50,000,000. By December 31, 2027, the maximum recoverable amount is estimated at P38,000,000, allowing for a gain on recovery from impairment of P8,000,000. The document also discusses various depreciation calculations and revaluation adjustments for different assets.

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32 views10 pages

Impairment and Recovery Analysis

On December 31, 20x5, Singkit Co. recognized an impairment loss of P10,000,000 for its manufacturing factory, which had a carrying amount of P50,000,000. By December 31, 2027, the maximum recoverable amount is estimated at P38,000,000, allowing for a gain on recovery from impairment of P8,000,000. The document also discusses various depreciation calculations and revaluation adjustments for different assets.

Uploaded by

castrojaniem
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd

On December 31, 20x5, the manufacturing factory of Singkit Co.

had a
carrying

amount of P50,000,000 (with a cost of P100,000,000 less accumulated


depreciation of

P50,000,000) was tested for impairment. An impairment loss of P10,000,000


was

recognized and the basis of the recoverable amount was the estimated fair
value less

costs to sell of P28,000,000. The factory had a remaining useful life of 8


years. On

December 31, 2027, there are indications that the impairment loss
recognized in 2025

may be reversed. The value in use is estimated at P35,000,000 while the


fair value less

cost to sell is estimated at 38,000,000.

Statement I: The maximum recoverable amount of the


manufacturing plant on

December 31, 2027, is P7,500,000 using the cost model.

Statement II: The gain on recovery from impairment in 2024 that should be
reported in

profit or loss is P8,000,000 using the revaluation model.

12/31/27- (50,000,000-10,000,000) x 6/8 = 30,000,000

Fvclts = 38,000,000

= 8,000,000

Carrying value without impaiment with DEPRECIATION

50,000,000 x 6/8 = 37,500,000

GAIN ON REVERSAL = 7,500,000


Land

60,000 + 10,500,000 + 200,000

New bldg

350,000 + 1,800,000 + 900,000 + 2,200,000 + 55,000,000

Land improb

600,000
Syd = (10*11)/2 = 55

ACCUMULATED DEPRECIATION (1,200,000-150,000) x (10+9+8+7)/55 =


649,090

1,200,000-649,090 = 550,091
COST REVALUED amt Increase
6,000,000 10,000,000 4,000,000
3,000,000 5,000,000 2,000,000
3,000,000 Sound value = 2,000,000
5,000,000
3,000,000/6,000,000 = 50%

5,000,000 / 50%

5,000,000 / 10 yrs remaining


COST REVALUED amt Decrease
10,000,000 5,000,000 5,000,000
AD 6,000,000 (5M+1m) 3,000,000 3,000,000
4,000,000 Sound value = 2,000,000
2,000,000

4,000,000 / 10,000,000 = 40%

REVALUATION surplus = 2,000,000

(2m/10) x 2 = 400,000

REVALUATION surplus = 1,600,000

(2,000,000)

= Reval loss = (400,000)

SYD = 55

( X – 50,000) x 8/55 = 240,000

240,000 x 55 divided by 8

1,650,000 = depreciable

1,650,000 + 50,000 = 1,700,000 cost

2025 – 10
2026 – 9

2027 – 8

Dissimilar – composite

Similar – group

Total cost – residual value = depreciable amt

Depreciable amt / useful life

Dep amt = 360,000

Annual dep = 22,500

Composite life = 16
Annual dep = 22,500

Total cost = 395,000

= 5.70%

1/1/22 – 1/1/24

Syd = 45

AD 15,000,000-1,500,000) x (9+8)/45 = 5,100,000

CA = 15M-5.1

6-2 = 4 remaining

NEW SYD = 10

Dep exp 2024 (9,900,000 – 900,000)x 4/10 = 3,600,000

AD = 5,100,000 + 3,600,000 = 8,700,000


Change in acctg estimate = prospectively

AD from 1/121 – 1/1/23

2/6 = .3333 or 1/3 for dep expense

2/3 is for CV
4,500,000 x 2/3 x 2/3 = 2,000,000 CA

2,000,000 /4 = 500,000 dep exp 12/31/24

AD 2,500,000 +500,000 = 3,000,000

2/10 = 20% 80% carrying value

2023 – 7,500,000 cost x 80% = carrying value 6,000,000

2024 – (6,000,000) carrying value x 20% = 1,200,000


Cash 75,500

Loss 6,000

Accumulate De 68,500

EQPT 150k

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