A company has a Cash Generating Unit (CGU) that had indicators of impairment for the year. The following information was provided on the assets: Carrying value at December 31, 2020 $1,700,000 Residual...


A company has a Cash Generating Unit (CGU) that had indicators of impairment for the year. The<br>following information was provided on the assets:<br>Carrying value at December 31, 2020<br>$1,700,000<br>Residual Value<br>Fair Value<br>$1,900,000<br>$6,120,000<br>Land<br>Building<br>Equipment<br>$ 800,000<br>$ 300,000<br>6,200,000<br>1,600,000<br>1,520,000<br>Goodwill<br>4,000,000<br>13,500,000<br>The remaining useful life of the building as at December 31, 2020 is 20 years. The selling costs are 6% of<br>the fair value for building and land. The selling cost for the equipment would be 8% of the fair value.<br>The projected cash flows of the CGU is as follows:<br>Year 1<br>$580,000<br>Year 2<br>580,000<br>Year 3<br>580,000<br>580,000<br>Year 4<br>Year 5<br>620,000<br>Assume that cash flows beyond year 5 will be the same amount.<br>Required:<br>Calculate the total impairment loss for the year ended December 31, 2020 and record the required<br>journal entry. Assume a discount rate of 6%.<br>

Extracted text: A company has a Cash Generating Unit (CGU) that had indicators of impairment for the year. The following information was provided on the assets: Carrying value at December 31, 2020 $1,700,000 Residual Value Fair Value $1,900,000 $6,120,000 Land Building Equipment $ 800,000 $ 300,000 6,200,000 1,600,000 1,520,000 Goodwill 4,000,000 13,500,000 The remaining useful life of the building as at December 31, 2020 is 20 years. The selling costs are 6% of the fair value for building and land. The selling cost for the equipment would be 8% of the fair value. The projected cash flows of the CGU is as follows: Year 1 $580,000 Year 2 580,000 Year 3 580,000 580,000 Year 4 Year 5 620,000 Assume that cash flows beyond year 5 will be the same amount. Required: Calculate the total impairment loss for the year ended December 31, 2020 and record the required journal entry. Assume a discount rate of 6%.

Jun 09, 2022
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