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How much is the impairment loss

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PROBLEM - ABC Corporation bought an equipment with a total cost of P4,000,000 on Jan. 1, 2016. It was depreciated using the straight-line method over 20 years with a salvage value of P400,000.

On Jan. 1, 2020, there is a foreseen decrease in the useful life of the equipment to only 8 remaining years. Hence, the asset is being tested for impairment. The current fair value less cost to sell is P600,000 while the salvage value at the end of the useful life is P400,000. Annual net operating cash flows is foreseen to be at P200,000 per year. The effective interest rate to be used for impairment testing is 6%. How much is the impairment loss?

Reference no: EM132963412

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