Reference no: EM132782792
Problem - On January 1, 2019, ABC Inc. acquired the following intangible assets:
A trademark for P3,000,000. The trademark has 8 years remaining in its legal life. It is anticipated that the trademark will be renewed in the future, indefinitely, without problem.
A patent for P6,000,000. Because of market conditions, it is expected that the patent will have economic life for just 5 years, although the remaining legal life is 10 years.
On December 31, 2019, the intangible assets are assessed for impairment. Because of a decline in the economy, the trademark is expected to generate cash flows of just P120,000 per year. The useful life of the trademark still extends beyond the foreseeable horizon. The cash flows expected to be generated by the patent are P1,000,000 annually for each of the next 4 years. The appropriate discount rate for all intangible assets is 6%. The present value of an ordinary annuity of 1 at 6% for four periods is 3.46. The fair value less cost to sell of the patent is P3,200,000.
Required - Compute the total amount of impairment loss for the year then ended.