Reference no: EM132999054
On January 1, 2020, due to the unexpected advances in technology, BTS Co. realized that its machinery has been impaired. The unit was purchased on January 1, 2016 for P20,000,000. The entity initially estimated that the asset has a useful life of 20 years with no residual value.
On that date, the fair value of the asset was P10,000,000. The cash inflows and outflows to be derived from the asset from its continuing use are as follows:
End of year Cash inflow Cash outflow
2020 7,500,000 3,500,000
2021 6,000,000 3,000,000
2022 4,000,000 2,000,000
2023 3,000,000 1,500,000
2024 2,500,000 1,000,000
Problem 1: Should the entity decide to continue to use the asset, remaining life will be 5 years. The discount rate used by the entity is 10%. How much is the impairment loss to be recognized on January 1, 2020?
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