Reference no: EM133027600
Question - On January 1, 2019, ABC Company purchased three product lines X, Y, and Z. Each product line is identified as an asset group. Depreciation is based on straight-line method. No residual value is expected. The purchase costs and useful lives of the three product lines are as follows:
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X
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Y
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Z
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Purchase Costs
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RMB 2 million
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RMB 2.4 million
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RMB 3.6 million
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Useful Life
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10 years
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8 years
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12 years
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Due to severe market competition, the sales of the products manufactured by the three product lines decreased significantly in 2019. Therefore, the company tested impairment for the three asset groups on December 31, 2019. In the impairment test, the company also considered the building for the corporate headquarters. Its carrying amount of RMB 2 million can be allocated to the three asset groups, based on weighted average of the carrying amount of each asset group and its remaining useful life.
ABC Company determined present values of expected future cash flows on December 31, 2019 as shown below:
Present value of expected future cash flows
X including the corporate headquarters RMB 2.5 million
Y including the corporate headquarters RMB 2.3 million
Z including the corporate headquarters RMB 3.8 million
The fair value less costs of disposal of the three asset groups cannot be determined reliably.
Required - Determine the carrying amounts after impairment losses on December 31, 2019 for each of the product lines (i.e. X, Y and Z alone) and the corporate headquarters, respectively. Round numbers to the nearest three decimal places (in millions).
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