Reference no: EM132945362

Question - Cream Company had a machinery costing P3,000,000 when purchased on January 2, 2009. Estimated useful life of the asset was for 2 years with no salvage value at the end of its usefu1 life. Cream uses the straight line method of depreciation. On January 2, 2014, Cream is evaluating the machinery for possible impairment. The machinery has a remaining useful life of 5 years and is expected to generate cash inflows of P500,000 per year and the company also expects to realize P200,000 from sale on the eventual disposal at the end of the fifth year. Cream has determined that the rate implicit in current market transaction for similar asset is 10% Available information as of January 2. 2014 also showed that the appropriate market price for the same asset is P2,000,000. Estimated cost of disposal, P150,000. What amount of impairment loss, if any, is to be recognized?