Reference no: EM132979051

Problem - One of the cash generating units of Severe Company is the production of liquor.

At the year-end, the entity believed that the assets of the cash generating unit are impaired based on an analysis of economic indicators.

The assets and liabilities of the cash generating unit at carrying amount at year-end are:

Cash 4,000,000

Accounts Receivable 6,000,000

Allowance for doubtful accounts 1,000,000

Inventory 7,000,000

Property, plant and equipment 22,000,000

Accumulated Depreciation 4,000,000

Goodwill 3,000,000

Accounts payable 2,000,000

Loans Payable 1,000,000

The entity determined that the value in use of the cash generating unit is P30,000,000.

The accounts receivable are considered collectible, except those considered doubtful.

Required -

1. Determine the carrying amount of the cash generating unit.

2. Determine the impairment loss, if any, of the cash generating unit.

3. Prepare journal entry to record the impairment loss.