Reference no: EM133188542

Question - Juan Company purchased four convenience store buildings on January 1, 2015 for a total of P25,000,000. The buildings have been depreciated using the straight-line method with a 20-year useful life and 10% residual value. On January 1, 2021, Juan has converted the buildings into a hotel and restaurant. Because of the change in the use of the buildings, Juan is evaluating the buildings for possible impairment.

Juan estimates that the buildings have a remaining useful life of 10 years, that their residual value will be zero, that net cash inflows from the buildings will total P1,500,000 per year, and that the current fair value of the four buildings totals P10,000,000. The appropriate discount rate is 12%. The present value of an ordinary annuity of 1 at 12% for 10 periods is 5.65. What impairment loss should be recognized for 2021?